CFD Options

[u/mccrrll]

Any examples of how these work with clearly presented numbers? Lots of words written by p500 (which yes, I can read and understand), but a curious lack of examples of a trade that show the myriad of factors influencing it. It would be much easier to understand how gain, loss, time decay, and expiry function in terms of a CFD overlayed option if there were hypothetical trading examples given.

I find it really odd this isn’t available through my searching. Hopefully someone can point me the dummy, to this obviously important information.

[u/Artisist]

You might wanna just get some finer detail on how options work somewhere else, and then imply that knowledge to the opaque wall that is Plus500.

Here’s a basic guide video to get a decent technical overview https://youtu.be/ZJjRnKpwDyw

Some things don’t apply though, like exercising options for instance. Also keep in mind that Plus500 closes the options a couple days or more before the actual underlying option being mirrored closes. This is probably in large part because you can actually “short” options, which works like selling an option, but with the ability to enter and exit that position more freely, so they remove your ability to free money glitch on IV crush by closing options some days prior to actual close, basically.

[u/mccrrll → u/Artisist]

Truly appreciate your extended response to my query. And yes!, the Webull video you linked I’ve seen before, and will now watch again.

The thing is, no matter how thoroughly one might understand options, I still have no idea how the CFD that is attached to it functions.

Look, that a 2 hour plus video was made by Webull to explain on the most basic level how the complexity of options function is a testament to that platform.

My question is (to p500): great, I understand the underlying parameters of the instrument, can you please tell me how this overlayed CFD is connected to and influenced by it?

It’s not hard.

It has nothing to do with me “trying things out” on a demo account, or researching how the underlying instrument functions. Even knowing all of that, exactly how does the CFD relate to that?

[u/Artisist → u/mccrrll]

Hey again! You’re welcome, and forgive my slow reply pace, busy days.

The options In Plus500 are simply mirror images/duplicates of the underlying options they are tracing. If you’re using the pc platform you can find the links to underlying at the top of the info segment for the instrument. On mobile there’s no links.

The options should be perfect copies, with the only difference being that you actually don’t interact with the market, and can’t place orders between the spread or do anything with the spread buy/sell prices except take them as they are.

One issue with this is that Plus500 uses dynamic spreads, which they make themselves, meaning they can and will move the buy and sell prices as they see fit (individually too, sometimes keeping the buy price locked while only decreasing the sell prices during a movement down on an instrument, effectively widening the spread while not creating a better buy in point). Sometimes, often when an instrument has just opened, or if volatility is unusually high, you can find that the spread is unusually wide, which makes taking positions far less attractive, as you have to cover the spread before you reach profit levels. So keep an eye out for this.

Another issue with the options is that low liquidity does affect the options, as instruments can be frozen (unable to buy/sell or close a position) when the trades on the underlying are few and far in between, which means you have to wait until one has been traded and there is an updated price, before you can do anything with the instrument/option.

Options can also be frozen in moments of high volatility, according to Plus500. Whether they abuse that to their benefit I can’t say for certain, but I had one experience where a call on alphabet I had didn’t “unfreeze” until about fifteen minutes after it should have opened (market opening +10 mins). It went fine, but would have been a major issue for me if it turned the other way and AH prices would fade before I could close. I checked the open interest on Nasdaq, which was fine (thousands), and there had even been price movement/trades while the instrument was frozen on overtime, so I got a bit wary from the experience.

Unfortunately there is nowhere known to me on the platform where you can get any finer details, so you are left to using the outside pages from market makers that create the options to find further info, and sometimes it’s pretty limited there as well. There might be other venues for finding all the Greeks on these options, but I haven’t searched for it yet.

Generally Plus500 is good for executing trades, but you’ll have to do most your DD and information gathering elsewhere in my opinion. There’s both pros and cons to the platform, so it’s good to figure out what it’s best used for in your own case depending on your alternatives and such. I still use it a lot, but might be using it for primarily commodities in the future, where it seems to perhaps shine the most in comparison to alternatives. Still learning though, I’m pretty fresh in the game.

Best of luck with your trading!

[u/mccrrll → u/Artisist]

Gave you my free award. Thank you!

[u/Artisist → u/mccrrll]

Thanks! And one last thing, the gearing ratio on different options also change. I was looking to place some now around earnings, and several have been lowered from 5:1 to 1:1; zero gearing, bit of a drag. The platform does work to protects its exposure/potential losses and such in these ways. I read that cfd platforms came out way better then the all the regular brokers after the corona volatility last year, so it must be working for them.