option is said to be at logical exercise.As the American-style option is more ﬂexible, shouldn’t it always be more expensive?Actually, the American option is not really more ﬂexible than the European option. True, itcan be exercised early and therefore the intrinsic value can be realized immediately, but unlessthe option is at logical exercise, the holder would be better to sell the option back and receivethe premium. (Remember, the premium represents the intrinsic value of an option plus timevalue.) This is true for both American and European options and, in both cases, if the optionis not at logical exercise, and the aim is to realize maximum proﬁt, it would be better to sellthan to exercise the option.Examples of cases when it would be better to pay extra premium and buy a more expensiveAmerican-style option are:1. In buying an option where the call currency (right to buy) has the higher interest rate and itis expected that the interest rate differential will widen signiﬁcantly.2. In buying an option where the interest rates are close to each other and it is expected thatthe call (right to buy) interest rate will move above the put (right to sell) interest rate;3. In buying an out-of-the-money option with interest rates as in (1) or (2), and it is expectedthat the option will move signiﬁcantly into the money, then the American-style option ismore highly leveraged and will produce higher proﬁts.
14.9 PRICING THEORYTheorists have devoted a substantial amount of work developing a mathematical model forpricing options and a number of different models exist as a result. All make certain assumptionsabout market behaviour, which are not totally accurate but which give the best solution to theprice of an option. Although the formulae for pricing options is complex, they are all based onthe same pricing principles.The price of an option is made up of two separate components:Option premium = Intrinsic value + Time valueThere are ﬁve factors that contribute to this pricing of an option:
r Prevailing spot pricer Interest rate differentials (forward rate)r Strike pricer Time to expiryr Volatilityr Intrinsic value.For European-style options, intrinsic value is the value of an option relative to the outrightforward market price, i.e. it represents the difference between the strike price of the option andthe forward rate at which one could transact today. Intrinsic value can be zero, but it is nevernegative.The best-known original closed-form solution to option pricing was developed by FischerBlack and Myron Scholes in 1973 (Black–Scholes Model). In its simplest form, it offers asolution to pricing European-style options on assets with interim cash payouts over the life of
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the option. The model calculates the theoretical, or fair, value for the option by constructingan instantaneously riskless hedge – that is, one whose performance is the mirror image of theoption payout. The portfolio of option and hedge can then be assumed to earn the risk-free rateof return.Central to the model are the assumptions that (1) markets’ returns are normally distributed(i.e. have log normal prices), (2) there are no transaction costs, (3) volatility and interest ratesremain constant throughout the life of the option, and (4) the market follows a diffusion process.The model has the ﬁve major inputs: the risk-free interest rate, the options strike price, theprice of the underlying, the option’s maturity, and the volatility assumed. Since the ﬁrst fourare usually determined, markets tend to trade the implied volatility of the option.For example, a 6-month European-style sterling put (right to sell), dollar call (right to buy)with the spot rate at $/£1.7500 and forward points of 515, giving an outright forward of 1.6985(1.7500–0.0515), will have intrinsic value of 4.15 cents per pound.If the strike price of the option is more favourable than the current forward price, the optionis said to be in-the-money. If the strike price is equal to the forward rate, it is an at-the-moneyoption, and if the strike price is less favourable than the outright forward, the option is termedout-of-the-money.For American-style options, a similar deﬁnition applies, except that the option’s ‘moneyness’ relative to the spot price also needs to be considered. Clearly, in the example above,an American-style option would be in-the-money relative to the forward but not to the spot.Conversely, if the option had the same details except that it was a call on sterling (right to buy),it would clearly be out-of-the-money under the European deﬁnition, but as an American-styleoption it would be in-the-money relative to the spot price. Naturally, the cost of the optionwould need to be considered in order to achieve a proﬁtable early exercise.
14.10 OTHER CONSIDERATIONS14.10.1 Market ConventionsHow should one ask for an option price? The required pieces of information, in the preferredorder, are as follows:
r The two currencies involved and which is the put and which is the call, e.g. dollar put, Swissfranc call.
r The period, e.g. two months or the expiry or delivery date, e.g. expiry 12 December, fordelivery 14 December.
r The strike, e.g. 1.5010.r The style, e.g. European or American style.r The amount, e.g. 10 million dollars.There are many ways of stating the period, but usually, if one date is stated, it is assumed to bethe expiry date although it is always much safer to specify. In the same way, if a 10-day optionis requested, it is assumes that the required option has an expiry date 10 days from the currentdate. If, however, an option is requested with a period in terms of months or years, e.g. threemonths, the dates of the option are worked out as follows:
r Calculate the spot date for that currency pair, using the same conventions as the spot market.r Take the period, e.g. three months from that date, using the forward market conventions.
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This gives the delivery date. The expiry date will then usually be two working days beforethat.The exceptions occur in any currency pair where spot is not two working days, for examplethe Canadian dollar, where the expiry date would be one working date before the delivery date.Note that with cross-currencies and dates involving American holidays, or in any case wherethere may be confusion, it is always best to quote both the expiry and delivery dates required.In asking for an option price, always state the call currency and the put currency. For example,does a dollar/Swiss franc (USD/SFR) put mean a dollar put or a Swiss franc put? On the optionexchanges and in the OTC interbank market, this would usually refer to a Swiss franc put/dollarcall. However, most corporations would probably mean a dollar put. For this reason, alwaysstate the case in full, e.g. dollar call/Swiss franc put, or vice versa.What does a live price mean? The price of an option is obviously dependent on the spotprice in the market. As an option trader needs to delta hedge the option immediately, the spotat which the trader can hedge is the rate the trader uses to price the option. If a price is beingquoted live it means that the person asking for the price will be quoted a premium price forthe option, and the option trader will take the risk that spot moves during the transaction. Thealternative to dealing live is to deal with delta. This means that the person asking the pricewill deal the delta hedge with the option trader as well as the option.How is the premium normally quoted? Normally, the premium is quoted as a percentageof the base currency amount of the option. However, in the interbank market, it is normallyquoted as pips per currency amount of the option. For example, if the option is a dollar/ Swissfranc option, the premium can be quoted in the following ways:1. Percentage of the dollar amount of the option.2. Percentage of the Swiss franc amount of the option.3. Swiss franc pips per dollar amount of the option.4. Dollar pips per Swiss franc amount of the option.If the option were being dealt in a round amount of dollars, e.g. 10 million dollars, then either(1) or (3) would be the usual quote. If (2) or (4) were required, however, the Swiss franc amountof the option is found by multiplying the dollar amount by the strike of the option.14.10.2 Premium ConversionsHow can one form of premium be quoted to another? The following formula can be used,where BC is the base currency (commodity currency) and NBC is the non-base currency(terms currency):1. % BC = %NBC × strike/spot2. % NBC = %BC × spot/strike3. NBC/BC = %NBC × strike4. BC/NBC = %BC/strike.For example, if a Swiss franc/dollar option costs 2.05% dollar amount, spot is 1.5500 and thestrike of the option is 1.5200, thenSFR/USD = 0.0205 × 1.5500 = 0.031775or318 Swiss franc pips per dollar.
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14.10.3 SettlementNormally, settlement takes place in full, e.g. if a dollar put (right to sell)/Swiss franc call (rightto buy) option is exercised, the full amount of the dollars will be paid to the option writer andthe exerciser will receive the full amount of Swiss francs from the option writer. As mentionedbefore, settlement takes place on the delivery date unless the option is American and has beenexercised early, in which case settlement takes place spot from the date the option is exercised.Is it necessary to settle both amounts in full? No – it is possible to ‘net settle’ the option. Thismeans that only the proﬁt on the option is paid from the writer to the holder of the option. Ifthis is decided at the time of exercise, the writer will normally quote the holder a spot rate, andif this rate is acceptable, the option proﬁt will be determined accordingly. If net settlement isagreed at the time of the original deal, it may be necessary to have a more formal arrangementfor determining the proﬁt on the option at the time of exercise.How is an option exercised? It is sufﬁcient that the option writer receives notice of exercisebefore the exercise time on the expiry date. This time is 1500 hours London time, 1500 hoursTokyo or 1000 hours New York time.14.10.4 Risks
r Credit risk – In selling an option to a client, there is no real credit risk if the option expiresworthless, i.e. it is not exercised. There is a transaction-related risk if it is exercised, whichis similar to risk on a spot settlement thus requiring a credit line to be in place in advance ofthe transaction. The client pays an up-front premium.r Market price risk – Because an option buyer enjoys the dual beneﬁts of insurance andupside potential, the option writer is subject to a greater amount of market/price risk whenit sells options than when it sells forward contracts. To compensate for this risk, the optionwriter charges the up-front premium.r Country risk – Similar to that for forwards and swaps.
CONCLUDING REMARKSIn summary, options are not merely insurance contracts against exchange risk but they are aboveall ﬁnancial assets that can be bought and sold just like tradable securities. Options may becombined so that their asymmetric payouts tailor a deﬁned risk proﬁle. Some combinations areprimarily trading strategies, but option combinations can also be a useful tool – for example, forinvestors to construct a strategy allowing them to take advantage of a particular view that theyhave about a market direction. Other strategies allow purchasers to give up some of the beneﬁtsthey may have received in market movements in return for a reduced premium payment. Itmust be remembered that buying a call and simultaneously selling a put with the same maturitydate and the same strike is equivalent to entering into a forward contract. However, above all,remember the following risk proﬁle of options:Long option: unlimited proﬁt potential – limited riskShort option: unlimited risk – limited proﬁt potential
15Picturing Proﬁt and Loss of OptionsThe illustration over (Figure 15.1) is used with each strategy. The diagram shows the proﬁt/loss scale on the left vertical axis. The horizontal zero line in the middle is the break-even point.Therefore, anything above that line indicates a proﬁt, anything below it, a loss. The scale alongthe bottom would represent the price of the underlying instrument, with lower prices to the leftand higher prices to the right. A, B, C etc. in the diagrams indicates the strike price(s) involved.
15.1 LONG CALL
B-E
A
When to useVery bullish on the market. The more bullish you are, the more out-of-the-money (higher)should be the option bought. No other position gives as much leveraged advantage in a risingmarket (with limited downside risk).Proﬁt charactersticProﬁt increases as the market rises. At expiration, the break-even point will be the option strikeprice A plus the price paid for the option. For each point above the break-even point, the proﬁtincreases by an additional point.Loss charactersticThe loss is limited to the amount paid for the option. Maximum loss is realized if the marketends below the strike price A. For each point above the strike price A, the loss decreases byan additional point.Decay charactersticThe position is a wasting asset. As time passes, the value of the position erodes towards theexpiration value. If volatility increases, erosion slows; as volatility decreases, erosion speeds up.
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Profit
Strike price
Break-even lineBreak-even point (B-E)
Premiun paid
ALoss
Figure 15.1 Proﬁt and loss options
15.2 SHORT CALLAB-E
When to useIf you ﬁrmly believe that the market is not going up. Sell out-of-the-money (higher strike)options if you are only somewhat convinced; sell at-the-money options if you are very conﬁdentthat the market will stagnate or fall. If you feel the market will fall sharply, sell in-the-moneyoptions for maximum proﬁt.Proﬁt characteristicsProﬁt is limited to the premium received. At expiration, the break-even point is strike priceA plus premium received. Maximum proﬁt is realized if the market settles at or below strikeprice A.Loss characteristicsThe loss increases as the market rises. At expiration, the losses increase by one point for each
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point the market is above the break-even point. Because the risk is open-ended, the positionmust be closely watched.Decay characteristicsThe position is a growing asset. As time passes, the value of the position increases as theoption loses its time value. The maximum rate of increasing proﬁts occurs if the option isat-the-money.
15.3 LONG PUT
B-E
A
When to useVery bearish on the market. The more bearish you are, the more out-of-the-money (lower)should be the option bought. No other position gives as much leveraged advantage in a fallingmarket.Proﬁt characteristicsProﬁt increases as the market falls. At expiration, the break-even point will be the option strikeprice A minus the price paid for the option. For each point below the break-even point, theproﬁt increases by an additional point.Loss characteristicsThe loss is limited to the amount paid for the option. Maximum loss is realized if the marketends above the option strike price A. For each point below the break-even point, the lossdecreases by an additional point.Decay characteristicsThe position is a wasting asset. As time passes, the value of the position erodes towardsthe expiration value. If volatility increases, erosion slows; as volatility decreases, erosionspeeds up.
15.4 SHORT PUTWhen to useIf you ﬁrmly believe that the market is not going down. Sell out-of-the-money (lower strike)options if you are only somewhat convinced; sell at-the-money options if you are very conﬁdent
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that the market will stagnate or rise. If you think the market will only rise, sell in-the-moneyoptions for maximum proﬁt.Proﬁt characteristicsProﬁt is limited to the premium received. At expiration, the break-even point is strike price Aminus premium received. Maximum proﬁt is realized if the market settles at or above strikeprice A.Loss characteristicsThe loss increases as the market falls. At expiration, the losses increase by one point for eachpoint the market is below the break-even point. Because the risk is open-ended, the positionmust be closely watched.Decay characteristicsThe position is a growing asset. As time passes, the value of the position increases as theoption loses its time value. The maximum rate of increasing proﬁts occurs if the option isat-the-money.
15.5 LONG STRADDLE
B-E
A
When to useIf the market is near A and it is expected to start moving but you are not sure which way. Thisis an especially good position if the market has been quiet, then starts to zigzag sharply,
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signalling a potential eruption. You should buy a call and a put at the same strikeprice A.Proﬁt characteristicsProﬁt is open-ended in either direction. At expiration, the break-even point is at strike priceA plus or minus the cost of the combined premium. (However, the position is seldom held toexpiration because of increasing decay levels with time.)Loss characteristicsLoss is limited to the cost of the spread (the call–put spread). Maximum loss is incurred if themarket is at A at expiration.Decay characteristicsDecay accelerates as the options approach expiration. For this reason, the position is adjustedto neutrality by frequent proﬁt taking. It is normally taken off well before expiration.
15.6 SHORT STRADDLEA
B-E
When to useIf the market is near strike price A and it is expected that the market is stagnating. Because youhave short options, you reap the proﬁts, in terms of premium retention, as they decay – as longas the market remains near strike price A. You would sell a call and a put at strike price A.Proﬁt characteristicsProﬁt is maximized if the market, at expiration, is at strike price A, i.e. premium received from.The break-even point is strike price A plus or minus that amount.Loss characteristicsLoss potential is open-ended in either direction. The position, therefore, must be closely monitored and readjusted to neutrality if the market begins to drift away from strike price A. Onlyone option will be exercised, however.Decay characteristicsBecause you have short options, you pick up time-value decay at an increasing rate as expirationnears, maximized if the market is near strike price A.
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15.7 LONG STRANGLE
B-E
A
B
When to useIf the market is within or near an A–B range and has been stagnant. If the market explodeseither way, money is made. If the market continues to stagnate, you lose less than with a longstraddle. You should buy a put option with a strike price A and a call option with a strikeprice B.Proﬁt characteristicsProﬁt is open-ended in either direction. With the put A vs call B version (most common),break-evens are at strike price A minus the cost of the spread and strike price B plus the costof the spread. Only one option will be exercised at expiration, however.Loss characteristicsLoss is limited. In most common versions, loss is equal to the net cost of the position. Maximumloss is incurred if, at expiration, market is between strike prices A and B.Decay characteristicsDecay accelerates as the options approach expiration, but not as rapidly as with a longstraddle. To avoid the largest part of the decay, the position is normally taken off prior toexpiration.
15.8 SHORT STRANGLE
A
B
B-E
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When to useIf the market is within or near an A–B range and, though active, is quieting down. If the marketgoes into stagnation, you make money; if it continues to be active, you have a slightly smallerrisk than with a short straddle. You should sell a put option at strike price A and a call optionat strike price B.Proﬁt characteristicsMaximum proﬁt equals the option receipts for the call and put. Maximum proﬁt is realized ifthe market, at expiration, is between strike price A and strike price B.Loss characteristicsAt expiration, losses occur only if the market is above strike price B plus option receipts orbelow strike price A minus that amount. Potential loss is open-ended. The position is notriskless and only one side will be exercised.Decay characteristicsBecause you have only short options, you pick up time-value decay at an increasing rate asexpiration nears, which is maximized if the market is within the A–B range.
15.9 BULL SPREAD
B
B-EA
When to useIf you think the market will go up or, at least, is more likely to rise than to fall. This is a goodposition to have if you want to be in the market but are unsure of your bullish expectations. Thisis the most popular bullish trade. You should buy at strike price A and sell at strike price B.Proﬁt characteristicsProﬁt is limited, reaching a maximum if the market ends at or above strike price B at expiration.If a call-vs-call version (most common) is used, then the break-even point is at strike price Aplus the net cost of the spread.Loss characteristicsWhat is gained by limiting the proﬁt potential is mainly a limit to loss if you made a wrongguess on the market. Maximum loss is if the market at expiration is at or below strike price A.With call-vs-call version, the maximum loss is the net cost of the spread.
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Decay characteristicsIf the market is midway between strike price A and strike price B, there is no time effect. Atstrike price B, proﬁt is maximized. At strike price A, losses increase at maximum rate withtime.
15.10 BEAR SPREADBB-E
A
When to useIf you think the market will fall or, at least, is more likely to fall than to rise. It is the mostpopular position among bears because it may be entered as a conservative trade when youare uncertain about a bearish stance. You would buy at strike price A and sell at strikeprice B.Proﬁt characteristicsProﬁt is limited, reaching a maximum if the market ends at or below strike price B at expiration.If a put-vs-put version (most common) is used, then the break-even point is at strike price Aminus the net cost of the spread.Loss characteristicsBy accepting a limit to proﬁts, you gain a limit to risk. Losses at expiration increase as themarket rises to strike price A, where they stabilize. With put-vs-put version, the maximum lossis the net cost of the spread.Decay characteristicsIf the market is midway between strike price A and strike price B, there is no time effect. Atstrike price B, proﬁts are at a maximum. At strike price A, losses increase at a maximum ratewith time.
15.11 LONG BUTTERFLYWhen to useOne of the few positions which may be entered into advantageously in a long-term optionseries. You buy the ‘wings’ (strike prices A1 and A2) and sell the ‘body’ (straddle strikeprice B).
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103
B
A2
A1
Note: B–A1 must equal A2–B
Proﬁt characteristicsMaximum proﬁt occurs if the market is at B at expiration. That proﬁt would be B minus Aminus cost of doing the spread. (This proﬁt develops, almost totally, in the last month.)Loss characteristicsMaximum loss, in either direction, is the cost of the spread. This is a very conservative trade,with break-even points at strike of call A1 plus the cost of the spread and at strike of put A2minus the cost of the spread.Decay characteristicsDecay is negligible until the ﬁnal month, during which a distinctive pattern of butterﬂy forms.Maximum proﬁt growth is at B, but if you are away from the A1–A2 range entering into thelast month, then perhaps the option should be liquidated.
15.12 SHORT BUTTERFLY
B1
B2
A
Note: A–B1 must equal B2–A
When to useWhen the market is either below strike price B1 or above strike price B2 and the positionis overpriced with approximately one month to run. Or, if, with only a few weeks left, themarket is near A and it is expected that there will be an imminent move in either direction. Youwould buy the ‘body’ (straddle strike price A) and sell the ‘wings’ (strike call B1 and strikeput B2).
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Proﬁt characteristicsMaximum proﬁt is credit for which the spread is put on. This occurs when the market, atexpiration, is below B1 or above B2, thus making all options in-the-money or all optionsout-of-the-money.Loss characteristicsMaximum loss occurs if the market is at strike price A at expiration. Amount of that loss isA minus B1 minus credit received when setting up the position. Break-even points are at B1plus initial credit and B2 minus initial credit.Decay characteristicsDecay is negligible until the ﬁnal month, during which the distinctive pattern of butterﬂy forms.Maximum loss acceleration is at A.
15.13 LONG CONDOR
B
A
C
D
Note: B–A, C–B and D–C are all equal
When to useEnter in far-out months, if desired. It is worth twice the average of A–B–C and B–C–Dbutterﬂies because it has twice the proﬁt area.Proﬁt characteristicsMaximum proﬁt is realized if the market is between strike price B and strike price C atexpiration. For all-call or all-put versions, those proﬁts equal B−A minus cost of optionsat set-up. Break-even points are at strike price A plus that cost and strike price D less thatcost.Loss characteristicsMaximum loss occurs if the market is below strike price A or above strike price D at expiration.For all-call or all-put versions, that loss is cost at set-up of the position.Decay characteristicsDecay is negligible until the ﬁnal month, during which the ‘super butterﬂy’ condor developsits characteristic shape. Maximum proﬁts occur in the B–C range.
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15.14 SHORT CONDOR
A
D
B
C
Note: B–A, C–B and D–C are all equal
When to useNormally entered into when the market, with less than one month to go, is between strike price Band strike price C, but you think there is good potential for a strong move outside of thatrange.Proﬁt characteristicsMaximum proﬁt will occur if the market is below strike price A or above strike price D atexpiration. That proﬁt, for all-put or all-call versions, will be credit received when the positionis set-up.Loss characteristicsMaximum loss will occur if the position is held to expiration and, at that time, the marketis between strike price B and strike price C. For all-call or all-put versions, this amount toB− A− credit received.Decay characteristicsDecay is negligible until the last month, during which a distinctive condor pattern emerges.Loss accelerates via decay with the market between B and C.
15.15 CALL RATIO SPREAD
B-Ea
A
B
B-Ea+b
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When to useThis spread is usually entered into when the market is near strike price A and the user expectsa slight rise in the market but sees a potential for a sell-off. Buy strike price A and sell strikeprice B in twice the amount or some other ratio amount.Proﬁt characteristicsMaximum proﬁt is at strike price B. Proﬁt then decreases and only at break-even a + b is theposition ﬂat. Anything over break-even a + b represent a loss.Loss characteristicsLoss is limited on the downside, but open-ended if the market rises. The rate of loss, if themarket rises beyond B, is proportional to the number of excess shorts in the position, i.e. asdetermined by the initial ratio.Decay characteristicsIf the market is at strike price B, proﬁts from option decay accelerates most rapidly with thepassage of time. At strike price A, you have the greatest rate of loss accrual by the time decayof the long option.
15.16 PUT RATIO SPREAD
B-Ea+b
B
B-Ea
A
When to useThis strategy is usually entered into when the market is near strike price A and you expect themarket to fall slightly but see a potential for a sharp rise. Buy a put strike price A and sell aput strike price B in twice the amount, or some other ratio amount.Proﬁt characteristicsMaximum proﬁt is at strike price B. Proﬁt then deteriorates so that at break-even a + b, theposition is ﬂat.Loss characteristicsLoss limited on upside (to net cost of the position) but open-ended if the market falls. Therate of loss, if the market falls below B, is proportional to the number of excess shorts in theposition.
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107
Decay characteristicsIf the market is at strike price B, proﬁts from option decay accelerates most rapidly with thepassage of time. At strike price A, you have the greatest rate of loss accrual the time by decayof the long option.
15.17 BARRIERSSpot
Out-of-the-money knock-outA standard option that automatically cancels out if spot tradesthrough a predetermined knock-out level. This level is set belowthe initial spot for a call option, and above spot for a put.
KO
Spot
KO
Spot
KOKO
In-the-money knock-outA standard option that automatically cancels out if spot tradesthrough a predetermined knock-out level. This level is set abovethe initial spot for a call option, and below spot for a put.Double Knock-OutA standard option that automatically cancels out if spot tradesthrough either one of two predetermined knock-out levels. Oneof the knock-out levels is set above the initial spot and the otherone below spot – hence there is both an out-of-the-money and anin-the-money knock-out with these options.
Spot
Out-of-the-money knock-inA standard option that can only be exercised upon expiry providingthat spot has previously traded through a predetermined knock-inlevel. This level is set below the initial spot for a call option andabove spot for a put.
KI
Spot
KI
In-the-money knock-inA standard option that can only be exercised upon expiry providingthat spot has previously traded through a predetermined knock-inlevel. This level is set above the initial spot for a call option andbelow spot for a put.
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SpotKI
KO
Knock-in/knock-outA standard option that automatically cancels out if spot tradesthrough a predetermined knock-out level and, in addition, canonly be exercised upon expiry providing that spot has previouslytraded through a predetermined knock-in level. The knock-outlevel is set below the initial spot for a call option and above spotfor a put. Similarly, the knock-in level is set above spot for a calland below spot for a put.
Glossary of Terms for Chapters 14 and 15American option An option which may be exercised at any time.Assignment Notiﬁcation to the option writer requiring that person to fulﬁl his or her contractual obligations to buy or sell the currency.At-the-money forward An option with an exercise price equal to the currency forwardrate.At-the-money spot An option with an exercise price equal to the currency spot rate.Bear spread An option strategy designed to allow the trader to participate, with limitedproﬁt and limited risk, in the decline of a currency.Break-even point The foreign exchange rate or currency futures price at which a strategyneither makes nor loses money.Bull spread An option strategy designed to allow the trader to particip