Thursday, April 2, 2015

ASX Index Option Review

I want to trade another market/product, in the same timezone, in addition to K200 Index Option to diversify.  With that, I start to explore Australian Stock Exchange (ASX) Index Option.

Basic Option Spec: (

  • Exercise Style : European
  • ASX Index Option is AUD 10 per index point
  • Minimum Spread : 25 points, ie AUD 250 (~USD  189.82 or ~SGD 258.62)
  • Trading Hours is 9:50am - 5:00pm & 5:30pm - 7:00pm Sydney Time (6:50am - 2:00pm & 2:30-pm - 4:00pm Singapore Time)

Cost of Trading
1. Market Data AUD 25.00 (~USD 18.98 or ~SGD 25.87)
- Korean Stk Exch Deriv Free

IB market data is generally cheap.  While USD 18.98 market data per month is not expensive, it is relative more expensive than other exchanges.  For example, Korea is free, Singapore is SGD 1.00 (~USD0.78) and US Bundle (USD 10.00)  & US Options (USD 1.50) are waived when monthly commission generated reached USD 30.00 & USD 20.00 respectively.

2. Commission
- AUD 2.00 (~USD1.52 or ~SGD2.07) per contract
- 0.2% of option value, min KRW 1,000 (~USD 0.93) per order

Assuming 10% premium (ie AUD 25) collected from Credit Spread,
- ASX commission will take 16% away from the 10% premium received, ie for every AUD 25 premium received, AUD 4 (1 spread = 2 contracts = 2 x AUD 2.00) will be deducted for commission.
- For round-turn spread trades AUD 8 will be incurred in commission.
- With target profit of 80%, ie AUD 20, the commission takes away AUD 8, 40% of the profit.  The net profit is only AUD 16.
- Even if held to expiration with full AUD 25 profit, the commission still takes away AUD 8, 16% of the profit.  The net profit is only AUD 21.
- The worst thing is: the typical premium is only about AUD 10 - 20.

- K200 commission will only take about 0.76% (depending on contract value) from the premium, ie for every $100 premium received, only about $0.76 is deducted for commission.

3. Margin
- for a ASX Option 25pt Spread (min spread), the Initial & Maintenance margin is about USD 104.17  & USD 83.63 (SGD 142 & SGD 114) respectively
- for a K200 Option 2.5pt Spread (min spread), the Initial & Maintenance margin is about USD 637 & USD 510 respectively

For ASX Option, selling a 25pt Spread to receive say 2.5 pt (10% min premium) is about AUD 25 (~USD 18.98 or ~SGD 25.87), I will need to tied up USD 104.17  & USD 83.63 (SGD 142 & SGD 114)  initial/maintenance margin.  Return On Margin (ROM) is 18.21%/22.69%.

For K200 Option, selling a 2.5pt Spread to receive say 0.25 pit (10% min premium) is about KRW 125,000 (~USD 115.75), I will need to tie up USD 637/510 initial/maintenance margin.  Return On Margin (ROM) is 18.17%/22.69%.

4. Option price spread and volume
K200 Option spread is generally about 2 ticks wide.  Selling at midpoint has been generally successful.  The Bid and Ask volume is also good.

ASX Option spread is about 2-3 ticks wide.  Selling at midpoint has been not successful.  Not only the Bid and Ask volume is comparatively lower, there is even no transaction for most of the delta 10-12 options.

The trading cost (in particular Commission) of ASX Option is simply too high to trade.  The commission can easily eat away 16-40% of the profit, assuming 10% premium.  However, as can see from the Bid/Ask spread, the premium is typically AUD 10-20 (i.e. 4-8% premium).  The return is simply quite bad.
The worst thing is there is no transaction for options with delta 10-12!  This simply make ASX Index Option not suitable for my trading strategy.


  1. Good to see you back, Tony.

    Your blog has been both educational and inspirational, and I hope you continue to do well with your option writing strategies.


  2. Thanks William. I am glad that the materials are useful for you.