A short Option position exposes its holder to the risk of being assigned to deliver the underlying asset, when another market participant who holds a long position exercises his Option’s right.
Losses on a short Option position can be substantial when the market moves against the position.
Saxo Capital Markets will charge premium margin to ensure sufficient account value to be available to close the short position and additional margin to cover overnight shifts in the underlying value.
The margin charges are monitored in real-time for changes in market values and a stop-out can be triggered when the total margin charge for all margined positions exceeds the client’s margin call profile.
The generic formula for the short option margin charge is:
Short Option Margin = Premium Margin + Additional Margin