PRIIPS/KIDs for US ETF Long Options in the UK/EU and Interactive Brokers

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bermondsey

Are UK/EU people here able to buy US ETF options (on SPY, QQQ, etc) at the moment on Interactive Brokers under a normal retail investor account? I have seen a 2018 ET thread on why UK/EU people can't hold US ETFs themselves, but can hold US ETF options. But I have seen conflicting info about this in other forums.

To satisfy PRIIPS, the OCC has made a KID available for 'Long Calls' on Equity amongst other things here: https://www.theocc.com/components/docs/about/publications/kids/english/eo-long-call.pdf , but I can't find one for ETFs. Is an ETF treated as an equity by the OCC? If not, does anyone know if a KID for ETF options exist?

I'm also wondering whether KIDs for Options trading on European stock exchanges differentiate between an Equity Option and an ETF Option?
 
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qwerty11 said:
BTW I guess the PRIIPS rules will be discarded as of 1-1-2021 for UK residents?
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Wouldn't it have been possible for the UK to veto this rule while still in the EU? I'm not expecting the UK to drop this rule unless there is a strong political push in that direction, which I'm not sure exists.
 
qwerty11 said:
Document is meant for both stock and ETF options.
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In Saxo's page, I can see that stocks and ETFs are addressed separately for Eurex (see the ones in Czech language: The have a KID for 'akcie' (stocks) and another one for ETFs: https://www.home.saxo/legal/key-information-documents/kid )

https://www.home.saxo/-/media/docum.../eurex/eurex-cesky/nakup-call-opce-na-etf.pdf (it's all greek for me anyway..)

I reckon that some exchanges tend to differentiate between normal stocks and ETFs more than others (like the US ones) in some contexts?
 
I hope that is right. My account with IB is via TradeStation Global, and when I asked their support, they said I can't hold options on US ETFs that I am not allowed to trade (with a link to an IB page, although the page itself had a general guidance on instruments that didn't have KIIDs and nothing specific with options). I also saw that someone in a different forum received the same response from IB customer support directly.

But the IB system itself doesn't seem to be worried about this, as I was able to set up a few trades, although the aforementioned person was not able to. On the other hand IB didn't allow me to trade the ETFs directly (correctly).

I attempted trades of ETFs and options on Saxo (even though I didn't have any money there), and they gave a cryptic error message when I attempted to trade SPY, which upon googling I understood was a reference to having no KIID, but on the other hand the SPY option was okay (apart from lack of money!), and in fact Saxo have created a KIID for that themselves, and they apparently call it an 'Option CFD' KIID.

I hope the customer support was wrong and IB won't do a rampage of liquidation through my account one fine morning, but if I know that that happened soon enough, I might have to move my money out of IB and into Saxo, but this involves the risks of spreads involved in buying and selling as well as delay in the money reaching my bank (but not from the bank to Saxo as fortunately, Saxo allow card deposits).
 
bermondsey said:
I hope the customer support was wrong and IB won't do a rampage of liquidation through my account one fine morning, ...
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It is really not an issue, they gave you a wrong answer because it is illogical that you can trade ETF options but no ETFs. But there is no logic as these rules are made by the EU and so there's no "market logic" in it.

(to take away your liquidation worries: you still are allowed to hold (non KID) ETFs, you are only not allowed to do opening transactions (i.e. initiate long or short). So in the theoretical scenario you are not allowed to trade ETF options anymore, you can still hold them and close whenever you want)
 
I could be wrong, but I recall being told:
I could open up option positions on SPY, but if it got exercised the underlying would be immediately liquidated instead. So instead of ending with SPY in my portfolio, it would be sold at market value right away.
 
bermondsey said:
Are UK/EU people here able to buy US ETF options (on SPY, QQQ, etc) at the moment on Interactive Brokers under a normal retail investor account? I have seen a 2018 ET thread on why UK/EU people can't hold US ETFs themselves, but can hold US ETF options. But I have seen conflicting info about this in other forums.

To satisfy PRIIPS, the OCC has made a KID available for 'Long Calls' on Equity amongst other things here: https://www.theocc.com/components/docs/about/publications/kids/english/eo-long-call.pdf , but I can't find one for ETFs. Is an ETF treated as an equity by the OCC? If not, does anyone know if a KID for ETF options exist?

I'm also wondering whether KIDs for Options trading on European stock exchanges differentiate between an Equity Option and an ETF Option?
More...
You can't buy them directly but you can sell Options on them and get assigned. ETFs have to be UCITS Certified, Spy and QQQ got Certified and issued by various companies. Most popular ETFs can be bought in Europe. Getting assigned US ETF brings a bunch of tax issues with it. You can keep the assigned ETF or close it.
 
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