How to buy an option in the IG platform

Suppose you want to open an option trade on a stock index like the FTSE 100.

You can use our web platform or mobile apps. Access options markets from the finder menu and scroll down the list of assets and maturities, or use the filters on the left to narrow your search.

You can drill down to the asset class and maturity you are interested in.

You’ll see the options chain: a list of strikes, prices for both puts and calls, along with the implied volatility (IV) value. This is a measure of how volatile the underlying asset is. The higher the IV value, the more likely it is that the underlying price will change dramatically.

You can select different maturities and see the price for each one.

To bring up a deal ticket, select ‘buy’.

You’ll see a deal ticket containing fields much like the following – the figures are as an example only.

Another example: let’s say the FTSE is trading at 6050. You decide to buy a FTSE 6100 call option priced at 45/50. The premium for this option is £50. You choose to buy one contract (£10 lot size), so buying one option costs you £500.

When buying an option, the total cost is equal to the premium paid. A spread – the difference between the bid and ask prices – is incorporated into your £500 premium.

If the FTSE moves above 6100 before expiry, your option has intrinsic value and is said to be ‘in the money’. If it expires above 6150 – the breakeven point – you’ve made your premium back and are in profit. The profit potential is unlimited, and depends on how far the underlying moves above the strike price.

If the FTSE moves in your favour and your option’s time value is high, or if volatility increases sufficiently, you can also close your position early to take profit. You can monitor your trade in the open positions screen, and see the current price we are making for that option at any time.

Final profit/loss is calculated in the following way:

Profit/loss = size x (option closing price - option opening price)

Keep in mind that your loss is limited to your premium, though – even if the above calculation gives you a higher figure.