Options Trading Rules

Trading Time

Options trading is 24/7 round-the-clock trading, which will not be suspended unless it is during the delivery of Weekly options at 16:00 (GMT+8) every Friday. The suspension period depends on the time to proceed delivery by the system.

 

Strike Price

A strike price is the set price at which an option contract can be bought or sold when it is exercised.

For newly generated option contracts, the option strike price will determine the intermediate strike prices based on the delivery price of that week, and set the strike price range and exercise interval according to a certain percentage.

There are intermediate strike prices, highest and lowest strike prices for the initial launched options. Each strike price corresponds to a call option and a put option.

In the circumstance that the underlying index fluctuates greatly and deviates far from the strike price range, the platform may add new strike prices based on market.

 

Trading Type

Option contracts are divided into two types: call options and put options. Call and put options have different strike prices. Each type of contract with different strike prices and different expiration dates could be considered as a trading pair.

Trading types can also be divided into two types which are opening positions and closing positions. Each type, no matter opening positions or closing positions, has two trading directions, which are buying and selling.

Buy to open positions means the user pays premium to buy a certain amount of options contract and the user will hold long positions if the order is filled.

Sell to close positions means the user sells options to close long positions, and the user’s long positions will be reduced if the order is filled.

Sell to open positions means the user freezes performance margin to sell a certain amount of options contract and receive premium. The user will hold short positions if the order is filled.

Buy to close positions means the user buys options to close short position, and the user’s short positions will be reduced if the order is filled.

Options are divided into two types which are call options and put options. Each type has different strike price and expiration date, which is quite similar to an independent trading pair.

Options sellers are obligated to buy/sell options on the expiration date. Huobi Options are delivered in price difference. In-the-money options will be exercised automatically on the expiration date and the seller has to pay delivery profits to the buyer.

 

Order Type

Limit order: The user needs to specify the price and quantity of the order. The limit order specifies the highest price that users are willing to buy or the lowest price that they are willing to sell. After the user sets the limit price, the market will prioritize the transaction at a price that is favorable to the user. Limit orders can be used to open and close positions.  For Limit Order, three mechanisms are available to be selected, which are "Post only", "FOK (Fill or Kill)", "IOC (Immediate or Cancel)"; if no mechanism is selected, the system will continue to use Limit Order by default.

Trigger order: When using Trigger Order, the user can set trigger price, type price and quantity in advance. When the latest price reaches the trigger price, the system will place an order based on the type price and quantity set in advance just like limit order.

BBO (Best Bid Offer) order: If the user selects BBO to place an order, the user is only required to enter the quantity, and the system will take the latest price of the opponent at the moment receiving this order (if the user is a buyer, the BBO price is the sell_one price; if the user is a seller, the BBO price is the buy_one price) to place an order.

Optimal N order: Using Optimal N order means that the user can place an orders based on BBO prices within the optimal N. Users can select from “Optimal 5”, “Optimal 10” or “Optimal 20” and enter the quantity to place an order. The Optimal N is available for both opening and closing positions, and for both Limit order and Trigger order, which can avoid the users' losses due to unable to fill the order when the market fluctuates violently.

Flash close: Flash Close is a function that would help users to place an order by using the prices within optimal 30 based on the BBO prices. And the unfilled parts will convert to Limit Order automatically. The close price of Flash Close is predictable, which can avoid the users' losses due to unable to fill the order when the market fluctuates violently.

 

Positions

After opening positions, positions with the same direction, same expiration date and same strike price will be merged. One options account can only have 2 positions with the same expiration date and same strike price, which are long and short positions

 

 Limitation on positions and orders

Huobi Options limits users’ gross positions and quantities of orders, to prevent market manipulation.

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[The above data and indicator contents may be adjusted in real time according to market conditions, and the adjustments will be made without further notice.]

Note:

  1. The same options will be merged. For example, a user first open 1 cont [BTC0703 C 9200 Weekly], and then opens two conts [BTC0703 C 9200·Weekly], then there will be 3 conts [BTC0703 C 9200·weekly] displayed at the positions.
  2. When closing a position, the cost is calculated by using moving average method. That is to say, the system uses average open price as the cost price to calculate profit and loss when closing the positions. For example, if a user opens one cont [BTC0703 C 9200·weekly] at the price 1000 BTC/USDT, and opens another two conts of the same contract at the price 1200 BTC/USDT, then the Average Open Price is (1000*1+1200*2)/ (1+2) = 1133.33 USDT.

 

 

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