Early Closure

Early Closure List

Introduction

OptionFair’s trading platform allows open positions to be closed prior to the scheduled expiry time. All open positions are listed in the “My Open Trades” section situated on the right hand side of Trade window. Click on the asset name to open the trading slip and view the return available for early closure. Simply click on the close button and the option will expire with this return.

Terminology

The following terms are used by OptionFair™ to calculate values for closing positions prior to the scheduled
expiry time:

Market Price:The last known market price as calculated from Bid, Ask and Last Trade prices
quoted by Data Provider.

Time to Expiration: The time left until the position reaches the scheduled expiry time.

In the Money: see  “In the Money” section below

Out of the Money: see  “Out of the Money” section below

Methodology

The system allows the trader to close the position prior to expiry.
The early close price (buyout price) depends on the probability (P) of the position to close “in the money”, which is calculated as a function of the following variables:

  1. Time left for expiry
  2. The asset’s volatility
  3. Current market price
  4. The strike price

Buyout value = [(Amount invested)* (P) *(payout) + (1 -P)* refund](1-commision percentage)

Where P= the probability of the position to close “in the money”

In the Money Close Value Calculations

Increase in close value

The following parameters will always increase the early close value for positions currently “in the money”:

Instrument Type of Option Parameter Change
All All Time to Expiry Shortens
High/Low High Market Price Increases
High/Low Low Market Price Decreases
One Touch No Touch Market Price Moves away from touch value
Boundary In Bound Market Price Moves towards the middle of the boundary formed by the upper and lower target values
Boundary Out Bound Market Price Moves away from the edges of the boundary formed by the upper and lower target values

Decrease in close value

The following parameters will always decrease the early close value for positions currently “in the money”:

Instrument Type of Option Parameter Change
High/Low High Market Price Decreases
High/Low Low Market Price Increases
One Touch No Touch Market Price Moves towards the touch value
Boundary In Bound Market Price Moves towards the edge of the boundary formed by the upper and lower target values
Boundary Out Bound Market Price Moves towards either edge of the boundary formed by the upper and lower target values

Out of the Money Close Value Calculations

Increase in close Value

The following parameters will always increase the early close value for positions currently “out of the money”:

Instrument Type of Option Parameter Change
High/Low High Market Price Increases
High/Low Low Market Price Decreases
One Touch Touch Market Price Moves towards the touch value
One Touch No Touch Market Price Moves away from touch value
Boundary In Bound Market Price Moves towards the boundary formed by the upper and lower target values
Boundary Out Bound Market Price Moves towards the edges of the boundary formed by the upper and lower target values

Increase in close Value

The following parameters will always decrease the early close value for positions currently “out the money”:

Instrument Type of Option Parameter Change
High/Low High Market Price Decreases
High/Low Low Market Price Increases
One Touch Touch Market Price Moves away from touch value
One Touch No Touch Market Price Moves towards the touch value
Boundary In Bound Market Price Moves away from the boundary formed by the upper and lower target values
Boundary Out Bound Market Price Moves towards the edges of the boundary formed by the upper and lower target values

Availability

The early closure feature is not available at the following times:

  1. For a certain time after the position is purchased (typically 5 minutes)
  2. From the no more trades time (5-7 minutes before the expiry time when trading is not allowed)

In addition OptionFair™ reserves the right to suspend the early closure functionality at any time.

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