Knock-outs (KOs) are financial derivative instruments (OTC options) defined under MiFID II. They are non-margin, predetermined-risk products, which means you pay the full Option Price upfront (including any knock-out fee). Your maximum possible loss is technically capped at this amount, although overnight funding adjustments and conversion fees can affect your final result.
Due to this non-margin, pre-determined risk status, parts 11 and 12 of the Capital Com SV Terms do not apply. Please refer to Appendix A of the T&Cs for full information on knock-outs.
You open a knock-out by paying a premium, not the full market value. That premium depends on how close your knock-out level is to the current market price.
- Set it closer → lower upfront cost, higher chance of being knocked out.
- Set it further away → higher upfront cost, lower chance of being knocked out.
Once opened, your knock-out’s value moves with the market:
- A Call knock-out gains value when the market rises.
- A Put knock-out gains value when the market falls.
Example: premium vs exposure
Take a look at an example knock-out trade.
Let’s say you’re trading one knock-out option on the Germany 40, which is currently priced at €10,000. You set your knock-out level 1% below that, at €9,900. Your Option Price would be €100, giving you exposure of €10,000.
The knock-out fee would be 0.02% of the exposure – that’s €10,000 × 0.02% = €2.
Because your knock-out level is close to the market, you’re paying a small amount upfront for a relatively large market position. Your trade will require less capital to open, but you’re also more likely to be knocked out if the market moves against you.
Now imagine setting your knock-out 10% below the market, at €9,000.
Your Option Price would now be €1,000, again giving exposure of €10,000 – but with a smaller proportion of market exposure for the amount you pay.
The knock-out fee remains 0.02% of the exposure – €2.
But because your knock-out is set further away, your upfront cost is higher for the same market exposure. You’re committing more capital per trade, but your position can withstand larger market swings before being knocked out.
What markets can I trade?
You can use knock-outs to trade on commodities, indices, crypto, shares, forex, ETFs, interest rates and bonds, whether prices are rising or falling. For the latest markets, log into your account and check our platform. To activate knock-outs in your trading account, just follow these steps.
What’s so special about knock-outs?
A key feature of knock-outs is the knock-out level, which works a bit like a guaranteed stop. It is the level at which your trade will be closed – or ‘knocked out’ – if the market reaches it.
You choose the knock-out level at the start of your trade. As well as enabling you to limit your risk, the level you choose has a direct effect on how much it costs you to buy an option.
Choose a knock-out level close to the market price, and you’ll pay less to buy an option. But you’ll still have access to the same upside as a more expensive trade.
This means that your trading budget can go further, and you’re risking less capital. However, you’re more likely to be knocked out.
Choose a knock-out level further away from the market price, and you’ll pay more to open. However, you’re less likely to be knocked out.
The knock-out level also provides built-in risk management. Your trade will never close at a worse price than the knock-out level. So it’s easy to see exactly how much you’re risking on each knock-out trade.
In platform behaviour, knock-outs always execute and settle under hedging-mode logic, regardless of whether the underlying CFD account is in hedging or normal mode. Good-till-cancelled (GTC) KO pending orders are cancelled automatically if a margin close-out occurs. Active KO positions are excluded from margin close-outs and remain open unless the account balance falls to zero or below and the platform cannot apply the required overnight fee.
You can also open both Call and Put knock-out options on the same market at any time, as each trade is treated independently.
Knock-out options are available only for selected countries.