How Much Does It Cost to Trade Options in the UK?

1. The Premium

The premium is the price you pay to buy an option contract. It is the single largest cost for most options buyers and represents your maximum possible loss on the trade, you cannot lose more than the premium paid.

Premium pricing is determined by several factors:

Intrinsic value — how far the option is “in the money.” A call option with a strike price below the current market price has intrinsic value; one with a strike price above the market price does not.

Time value — the longer an option has until expiry, the more time value it carries. Time value erodes daily through a process called theta decay — the closer to expiry, the faster this erosion accelerates.

Implied volatility — higher expected market volatility increases option premiums. When markets are uncertain or volatile, options become more expensive because the probability of a large price move increases.

Interest rates — affect the theoretical cost of carrying options positions, though this is a smaller factor for most retail traders.

The premium is expressed per share of the underlying — since most equity option contracts cover 100 shares, a premium of $2.00 per share means you pay $200 per contract.

2. The Bid-Ask Spread

Like all traded instruments, options have a bid price (what buyers will pay) and an ask price (what sellers will accept). The difference between these two prices is the spread — and it represents an immediate cost on every options trade you make.

Options spreads tend to be wider than those on the underlying shares, particularly for:

• Options on less liquid stocks
• Deep in-the-money or far out-of-the-money options
• Options with expiry dates far in the future
• Options traded outside peak market hours

For liquid index options — such as those tracking the S&P 500 or NASDAQ 100 — spreads are typically tight. For options on smaller individual stocks, spreads can be significantly wider and erode returns on short-term positions.

This is why trading during peak market hours matters for options, the same principle applies as with CFD trading, where spreads are tightest during the London/New York overlap.

3. Commission and Platform Fees

Commission structures vary significantly between brokers. Some charge a flat fee per contract, others charge a percentage of the premium, and some offer commission-free options trading with wider spreads built in.

Common structures you will encounter:

Always check your broker’s full fee schedule before trading, commission costs that seem small per trade can accumulate significantly for active traders. Read our guide on how to look for the best CFD broker for guidance on evaluating broker cost structures.

4. Overnight Financing Costs

For options held as CFDs or through certain structured products, overnight financing charges may apply if positions are held past the daily market close, similar to how CFD overnight financing works.

However for standard exchange-traded options, there is no overnight financing charge in the traditional sense — instead the cost of holding an option overnight is reflected in the daily erosion of time value (theta decay).

The distinction is important:

• Exchange-traded options — no overnight financing charge, but theta decay erodes the premium every day
• CFDs on options — overnight financing charges apply as with other CFD positions

For a full breakdown of how overnight financing works across derivative products, read our guide to CFD costs and fees.

5. Exercise and Assignment Fees

If you choose to exercise an option before or at expiry or if you are assigned on a short options position, some brokers charge an exercise or assignment fee. These fees vary widely between platforms and can be significant if you are trading multiple contracts.

Exercise occurs when you as the option buyer choose to invoke your right to buy or sell the underlying asset at the strike price.

Assignment occurs when you as the option seller are required to fulfil the contract — buying or selling the underlying at the strike price.

For most retail options traders who close positions before expiry rather than exercising them, exercise and assignment fees are rarely encountered. But it is important to understand they exist.

6. Currency Conversion Costs

Most major options markets including US equity options are denominated in USD. UK traders with GBP accounts will incur currency conversion costs when opening and closing positions, which can add a meaningful cost over time depending on the size and frequency of trades.

This is the same consideration as when trading US shares or ETFs denominated in foreign currencies, the FX conversion adds a cost layer that is easy to overlook.

Total Cost Example: Buying a Call Option

Here is how the costs stack up on a simple options trade:

Scenario: You buy one call option on a US technology stock

• Premium: $3.00 per share × 100 shares = $300 total premium
• Bid-ask spread cost: $0.10 per share × 100 shares = $10
• Commission: $1.00 per contract = $1
• Currency conversion (approx. 0.5%): $1.55
• Total entry cost: approximately $312.55

To break even on this trade, the option needs to gain enough value to cover the spread and commission before generating any profit. The premium itself is at risk from the moment you enter the position.

How Options Costs Compare to Other Instruments

For a deeper comparison of how options stack up against other products, read our guides to options vs CFDs, options vs shares and options vs ETFs.

How to Keep Options Trading Costs Down

Trade liquid options. The most liquid options — those on major indices, large-cap US stocks and popular ETFs — have the tightest spreads. Avoid thinly traded options where the bid-ask spread alone makes profitability difficult.

Trade during peak hours. Options spreads tighten during peak liquidity hours when the underlying market is most active. For US equity options this means during New York Stock Exchange hours — 2:30pm–9:00pm UK time.

Close positions before expiry. Exercising an option triggers exercise fees and potentially additional costs. Most retail traders close positions by selling the option back rather than exercising — avoiding these charges.

Factor all costs into your break-even. Before entering any options trade, calculate your total cost — premium plus spread plus commission plus any financing — and ensure your price target accounts for all of these. An option that looks profitable on the underlying price move may still lose money once costs are deducted.

Use a demo account first. Before committing real capital, practise on a demo account to understand how options pricing and costs behave in real market conditions without financial risk.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Capital at risk. Investment values can rise or fall. Tax treatment depends on your individual circumstances and ISA regulations which may change.