Options - Clearing

There are 2 (two) types of derivatives products traded on the Indonesia Stock Exchange (IDX), one of which is options. Option is a contract between two parties that provides for the option buyer the right to buy or sell an underlying asset at a specified time and price agreed at the inception. Options are traded on the Stock Exchange are Stock Options (KOS). As the name implies, the assets underlying these contracts are stocks. Currently, not all stocks listed on the Stock Exchange are underlying assets. This is done considering the underlying asset’s stock price volatility.

KOS products have the following main elements:

a. Underlying
  Underlying is an asset which becomes the basis of KOS, where currently are TLKM, INDF, ASII, and BBCA stocks.
b. Taker & Writer
  Taker is the options buyer and writer is the option seller.
c. Exercise & Assignment
  Option buyer (taker) has the right to sell or buy stocks to the option seller (writer) for the agreed price and at a specified maturity date. The option buyer executing his right is called exercise. When exercise happens, the writer is obligated to fulfil taker’s right or fulfil the assignment because writer has accepted the premium.
d. Premium
  KOS price is called a premium. Premium must be paid by option buyer (taker) and is settled on T+1 through KPEI to option seller (writer).
e. Strike Price
  The agreed price between taker and writer to buy or sell the stock at a specified time before the contract’s maturity.
f. Multiplier
  Multiplier is a factor multiplying a contract into a certain Rupiah value. KOS has multiplier amounting to 10,000, which means one KOS represents 10,000 shares of stock if a taker performs exercise.
g. Initial Margin
  Initial Margin or Pre-Order Risk is an amount of money that must be submitted by Clearing Members (CM) to be able to order a KOS transaction.

Call type KOS gives the right (not obligation) to option holder (taker) to buy a certain amount of stock. On the other hand, Put type KOS gives the right (not obligation) to option holder (taker) to sell a certain amount of stock. KOS traded on IDX are Americans, which means the option gives to opportunity to taker to exercise his right anytime until maturity date. 

Stock Options traded on IDX have the following contract specification:

EXERCISE-ASSIGNMENT TRANSACTION

The Exercise / Assignment model used is American Style, where AK can perform Exercise during the contract before the maturity date. Exercise request can only be done by Taker, and through derivatives clearing and settlement system which can be done during 1st trading session.

After 1st trading session closes, KPEI will execute the Exercise requested by Taker in the whole amount as long as the long position held is at least equal to the Exercise position previously requested by AK. After that KPEI will determine the partner randomly. Results of the Exercise/Assignment can be viewed by CM in the derivatives clearing and settlement system during the second trading session and in the Futures and Options Clearing Result List (CRL) that will be published on T + 0.

STOCK OPTIONS TRANSACTION CLEARING

The transaction clearing process for stock options is conducted by netting for each CM portfolio and its clients on contract positions, margins, exercise/assignment, and premium. The Clearing Results performed by KPEI will produce a document called Futures and Options CRL. CRL can be accessed by CM at 7.30pm every day on the same exchange day the Stock Option transaction is executed. KPEI uses a web-based system to conduct clearing and settlement of stock options. This system has the ability to provide clearing result information from CM level up to client level and can be accessed online by CM.

To access KPEI Rules governing the transaction Stock Option clearing, click here.

CALCULATION SIMULATION OF STOCK OPTION TRANSACTION RIGHTS AND OBLIGATIONS :