Options

To find out how to use the CommSec website to place an Options order, read the CommSec Options Web Guide.

Exercising an options contract refers to the process where the holder (buyer) of the option invokes their right to buy (in the case of a call option) or sell (in the case of a put option) the underlying asset at the predetermined price (strike price) on or before the expiration date of the contract. This action is typically carried out through the options clearinghouse and involves either buying or selling the underlying asset, depending on the type of option held.

It is important to note that index options are cash settled, hence there would no physical delivery of underlying asset upon exercise. Learn more.

There are four trading levels available for Options accounts. Each level identifies the type of transactions you are permitted to perform on the account.

Below is a summary of trading levels and transactions permitted:

• Level 1: Buy Calls and Puts to open + Sell Calls and Puts to close
• Level 2: Level 1 + Sell Specific Covered Calls
• Level 3: Level 2 + Sell Uncovered Options (Calls)
• Level 4: Level 3 + Sell Uncovered Options (Puts)

Learn more about the characteristics of each Options account level, likely investment objectives and potential financial risks.

What level is my account?

You can find your Options account level via CommSec website. Simply, login to your account and navigate to Portfolio, the account level is next to your Options account number.

How do I upgrade my account level?

Download and complete the Trade Level Change Form. This form can be located online by logging into CommSec and navigating to Help > Forms & Brochures > Derivatives, then selecting the Trade Level Change for Exchange Traded Options Form.

Return the completed forms to us via either of the below:
Email: CommsecDerivatives@cba.com.au.
Post: CommSec - Locked Bag 22, AUSTRALIA SQUARE NSW 1215

Before submitting a request to change your Options trading level, you should carefully consider your relevant circumstances including your experience, investment objectives, financial resources, and risk appetite.

Important information

There can be high levels of risk associated with trading in Options. Only investors familiar with the risks of Options trading should consider these products.

CommSec recommends that you seek independent taxation advice before entering into any Options strategies. The ASX provides general information on Taxation Treatment of Exchange Traded Options.

If you only buy Options, there would be no margin obligations. It is when you write Options that require non-specific or cash cover, that margin obligations may occur.

Margins are designed to protect the financial security of the market. If you write an Options contract, you have a potential obligation to the market because the taker of the Option may exercise their position. A margin is an amount that is calculated by ASX Clear as necessary to ensure that you can meet that obligation of your entire Options portfolio on that trading day. A broker may apply additional margin requirements on top of the ASX Clear Margin Calculation, or perform its own client obligation calculation to ensure it maintains sufficient collateral from its client to satisfy its own risk appetite.

Margin obligations are generally recalculated daily, but in extreme market events, they may be calculated more than once a day to ensure an adequate level of margin cover is maintained. This means that you may have to provide more collateral or pay more to meet your margin obligation if the market moves against you. If the market moves in your favour, your margin obligation may fall.

Below are some scenarios that may increase your margin obligations:

• The market moves against you relative to your position/portfolio, thus increasing your potential obligation under the options contract/s.
• ASX Clear increases the margin requirement on your positions, or, alternatively reduces the collateral value allowed on your shares lodged as cover.

CommSec’s Options margin obligation is the sum of the amounts that each of ASX Clear and CommSec separately calculate as necessary to ensure that you can meet your obligations to the market.

Total Margin = ASX Clear Margin + CommSec Margin

CommSec will generally require you to provide an additional amount of margin in addition to the ASX Clear Margin (CommSec Margin). For example, where CommSec considers that the existing margin is insufficient to cover the risk of your open position and having regard to market volatility.

CommSec may require a client who has written Options to provide additional cash or stock as collateral for their open positions, which is referred as Options margin call. Failure to meet a margin call may result in CommSec closing down your options positions without further reference to you.

How do I meet my margin obligations?

You can view the total margin required on your Options portfolio on your Position and Financial Statements which are sent to you daily while you have an open position, or from the CommSec website and take action to ensure your margin obligations are met as required. From time to time, you may also receive a phone call from the CommSec Options Desk to notify you regarding the margin obligations.

In general, CommSec will use eligible ASX-traded securities from your portfolio as collateral to provide security for your margin obligations. It is important to note that ASX Clear will apply a percentage discount (haircut) to the valuation of the securities held as collateral. In the event that all your eligible securities are lodged and your margin obligations exceed the total collateral valuation, then cash will be debited from your nominated bank account for your margin obligations.

If you incur a margin obligation, you are required to provide cash or ASX Clear Acceptable Collateral to CommSec by 2pm on the same trading day.

Please note: Once securities are lodged as collateral to cover margin requirements, they are unavailable for further trading through the online trading facility. Any collateral lodged can be released by calling CommSec Options Desk. Alternatively, log into CommSec and navigate to Portfolio > Accounts (Select Options account) > Transfer Shares (under Lodged Collateral) and complete the Recall Unutilised Shares request.

We're here to help.

For more information, please call the CommSec Options Desk on 1800 245 698 (8am to 5:30pm, Monday to Friday, Sydney time).

Log into CommSec and navigate to Portfolio > Accounts (Select Options account) > Transfer Shares (under Lodged Collateral) and complete the Recall Unutilised Shares request.

Note: You cannot request a stock release by email.

We will release your stock within 24 hours of receiving your online request, provided you still have sufficient collateral to meet your margin. Once your request has been processed, you will be able to view the changes to your linked share trading account online — units in the released stock will be moved from 'reserved' to 'available'.

Once it has been released you can sell it online or over the phone.

If you wish to sell reserved stock or require assistance, please contact us on 1800 245 698 from 8am to 5.30pm (Sydney time), Monday to Friday.

On the date of expiry at the close of business, CommSec will automatically exercise any long Options positions set to expire in the money.

Auto-exercise will be actioned for Options scenarios outlined below:

Any long equity Options position that is in the money by 1c or more, compared to the closing price of the underlying security on expiry date. When an equity Options position is exercised, it is settled via the linked CommSec Share Trading Account. It is your responsibility to ensure that you have the cash in the linked settlement bank account or security on your Share Trading Account to settle the transaction.

Any long index options position that is in the money by 0.1 point or more, compared to the index options settlement price. This is determined by the Opening Price Index Calculation (OPIC) on the morning of the expiry date. When an index Options position is exercised, this is cash settled via the Options Account which is then debited or credited through the linked settlement bank account.

Please note: Although an Option position is in the money and exercised automatically, you could still make a loss after taking fees and potential adverse market movement into account.

What if I do not want my options position to be automatically exercised?

If you do not want to exercise an in the money options contract, you must contact CommSec on the options expiry date prior to 4:30 pm (Sydney Time). We will accept verbal instructions not to exercise the options. Your request will effectively cancel your Options contract, which cannot be reversed.

For further clarification, please call the CommSec Options Desk on 1800 245 698 (8am to 5:30pm, Monday to Friday, Sydney time).

The definition of ‘in the money’ depends on whether you are talking about a Call Option or a Put Option. (Although ‘in the money’ indicates a positive position, it does not guarantee a profit because it does not take into account the cost of your position.)
A Call Option is ‘in-the-money’ when the share’s current market price is above the call’s strike price. In other words, if you are the holder of the Call Option, you have the right to buy it for less than its current market price.
A Put Option is ‘in-the-money’ when the share’s current market price is below the Put’s strike price. If you are the holder of the Put Option, you have the right to sell it for more than its current market price.
‘Out of the money’ means the converse for Call and Put Options. A Call Option is ‘out of the money’ when the share’s current market price is below the call’s strike price; for a Put Option, it is ‘out of the money’ if the current market price of the share is above the Put’s strike price.
‘At the money’ means the same thing for both Call and Put Options: the Option’s strike price is the same as the current market price of the underlying share.