TAIWAN FUTURES EXCHANGE-Clearing-Exchange Traded Derivatives Clearing-Margining-Margining Requirements-Margining Requirements for Equity Options

Determination of Margin Requirements

Margin requirements on equity options are set based on the risk associated with the trading strategy and position as described below (in the table below, call means “call option,” put means “put option”):

I. The underlying security is common stocks

(1) Single Position

Position	Margin Requirement
Long call	None
Long put	None
Short call	Market value of premium + Max (value of underlying stock ×a% - out-of-the-money, value of underlying stock ×b%)
Short put	Market value of premium + Max (value of underlying stock ×a% - out-of-the-money, strike price x strike price multiple ×b%) If the trading of the underlying stock on the Taiwan Stock Exchange or Taipei Exchange is suspended due to a violation by its issuer of the Securities Exchange Act or the rules and regulations of TWSE or TPEx, the margin requirement on selling a put option (short put) during the suspension period is: strike price x strike price multiple.

Determination of a% and b%

Group	Clearing Margin Rate		Maintenance Margin Rate		Initial Margin Rate
Group	a%	b%	a%	b%	a%	b%
Group 1	10.00%	5.000%	10.35%	5.175%	13.50%	6.750%
Group 2	12.00%	6.000%	12.42%	6.210%	16.20%	8.100%
Group 3	15.00%	7.500%	15.53%	7.765%	20.25%	10.125%

For equity options with risk parameters greater than 15%, TAIFEX will round up the actual computation result to the nearest hundredth and the rounded value will be used as a% for clearing margin level. The a% of maintenance margin and initial margin level will be calculated by adding a required mark up of a% of clearing margin level. In addition, b% will be equal to the half of a%.

TAIFEX reviews the level of risk parameters for equity options on a quarterly basis and in the following cases:
(1) The issuance of equity option with new underlying stocks.
(2) Other circumstances as necessary.

Following the review, TAIFEX will publish the risk parameters of each equity option in the different groups. These changed parameters will become effective after the close of trading of the next regular trading session following the announcement date.

Out-of-the-money

Out-of-the-money for short call ＝ MAXIMUM (strike price x strike price multiple - value of underlying stock, 0)
Out-of-the-money for short put ＝ MAXIMUM (value of underlying stock - strike price ×strike price multiple, 0)

Value of Underlying Stock

The value of underlying stock is determined by the methods below or as announced by TAIFEX:

I. Normal Circumstances

Market event	Value of Underlying Stock
Normal	Closing price x shares

II. Contract Adjustment

Market event	Value of Underlying Stock
Ex-right, ex-dividend	Closing price after ex-right/ex-dividend x ex-right shares
Capital decrease	Prior to reinstatement of trading: Closing price one day before suspension of trading x (1 - capital decrease ratio) x adjusted shares After reinstatement of trading: Closing price after capital decrease x adjusted shares
Merger	The continuing company is TWSE/TPEx listed Closing price of continuing company stock x adjusted shares The continuing company is a newly established company a. Unlisted new company Reference price of the newly combined company x adjusted shares b. Listed new company Closing price of new company stock x adjusted shares

III. If the underlying stock is suspended from trading due to a violation by its issuer of the Securities Exchange Act, or the rules and regulations of TWSE or TPEx, the value of the underlying stock for short call during the trading suspension period is determined as follows:

Market event	Value of Underlying Stock
No contract adjustment during trading suspension period	Closing price of the day before suspension of trading × shares
Ex-right/ex-dividend during trading suspension	Closing price of the day before suspension of trading ×shares

(2) Spreads

Position	Margin requirement	Remark
Bull Call Spread: buy low/sell high	None	Applicable only if the buy position and sell position have the same expiration date. If the combination of expiration dates does not follow the aforesaid position portfolio, margin is computed according to the method used for a single position.
Bear Put Spread: buy high/sell low	None
Buying call and selling call having the same or different strike price with the buy position having a farther expiration date (time call spread)	Max( the spot price of underlying stock × 10%, 2× premium difference (points) × contract multiplier )	Not applicable if the buy position and sell position have the same expiration date. If the buy position has a nearer expiration date than the sell position, margin is computed according to the method used for a single position.
Buying put and selling put having the same or different strike price with the buy position having a farther expiration date (time put spread)
Bear Call Spread: buy high/sell low	Difference between the strike prices of buy and sell position x contract multiplier	Applicable only if the buy position and sell position have the same expiration date. If the combination of expiration dates does not follow the aforesaid position portfolio, margin is computed according to the method used for a single position.
Bull Put Spread: buy low/sell high

(3) Mixed Position

Position	Margin requirement	Remark
Long call, long put	None
Short call, short put	MAXIMUM(short call premium, short put premium) ＋ market value of premium on option requiring less margin＋short straddle/strangle additional margin(C-value)	Same underlying stock. Straddle position if the strike price is the same. Strangle position if the strike price is different. C-value is only applied to individual investors and non-professional juristic investors, including account identification code of 0, 1, 3, 7, I, J, U, V, W. (Codes 1, 3, 7 are for Taiwanese individual investors. Codes I and J are for Foreign individual investors. Codes U and V are for Mainland China individual investors. Code 0 and W are for non-professional juristic investors that are registered in Taiwan) C-value =value of underlying stock×c% rounded to the nearest integer. c% is announced by TAIFEX.

(4) Combination of Options and Futures Positions

Position Description	Margin Requirements	Remarks
Buy 1 single stock futures contract with 2,000 shares of underlying security(or buy 20 single stock futures contract with 100 shares of underlying security) and sell 1 call equity option	Margin Required for 1 single stock futures contract with 2,000 shares of underlying security(or for 20 single stock futures contract with 100 shares of underlying security)+ premium for equity option	Applicable to single stock futures and equity options with the same underlying. One long single stock futures with 2,000 shares of underlying security(or twenty long single stock futures with 100 shares of underlying security) and one short call equity option can form a combination position. One short single stock futures with 2,000 shares of underlying security(or twenty short single stock futures with 100 shares of underlying security) and one short put equity option can form a combination position.
Sell 1 single stock futures contract with 2,000 shares of underlying security(or sell 20 single stock futures contract with 100 shares of underlying security) and sell 1 put equity option

(5) Conversion and Reverse Conversion

Position	Margin Requirement	Note
Conversion: Long put, short call	No margin required on long position. The margin on short position is calculated the same way as that on a short call or short put.
Reverse conversion: Long call, short put

Position

Margin Requirement

Note

Conversion:
Long put, short call

No margin required on long position.

The margin on short position is calculated the same way as that on a short call or short put.

Reverse conversion:
Long call, short put

II. The underlying security is exchange-traded funds(ETFs)