OPTREP - Terminal Options Report
What is OPTREP
There are 2 report styles that are designed to assist in the administration of the Option Positions of house and client accounts. The Cutoff date determines what open trades to include and which futures/options settlement prices to use.
Style 1 (Delta Report) is used to check that all the relevant prices and delta factors are present in the system for the cutoff date so that the Equity and Position reporting is correct when applying delta values to calculate futures equivalent lots. This report is also useful for reviewing the delta equivalent lots of the Option positions. Delta factors are collected from the market exchanges when the SPAN arrays and prices are secured. TPRICE will use the standard Black and Scholes algorithm to calculate deltas when new prices are entered or amended.
Style 2 (Options Valuation) locates all the option (client/house) positions, after applying filters, and calculates the theoretical premiums, delta, gamma, theta and vega factors. This is very useful for Trade Houses that are using option series beyond the market trading periods and there is a need to utilise theoretical delta and settlement prices. Delta is expressed as a factor between –1 and 1 which represents the likelihood of the option being exercised. Gamma is expressed as a factor between –1 and 1 which is applied in the same manner as delta i.e. option lots x factor = future lots equivalent. Theta is a measure of the time decay of an option, it is a $ amount that an option will lose each day. Vega measures the sensitivity of the option price to changes in volatility, again measured as a $ amount.
NOTE 1: The prices (TPRICE) that are reported are those entered as settlement for the CUTOFF date selected. They can be adjusted in style 2 for a ‘what-if’ scenario or where the Option Series Month is using a different settlement month to that suggested
NOTE 2: The ‘Options Valuation’ process can access it’s Volatility values from the Option TPRICE record, else if not available will use the Futures TPRICE volatility ELSE will apply sub-system default value of 30% for all commodities except for London White Sugar (LNWS = 23%). The Column ‘Vol Origin’ will state that the process has used ‘Default’ value or ‘Market’ (TPRICE volatility of Futures usually – see help? on ‘Apply Options Volatility’)
NOTE 3: The ‘Options Valuation’ will use a default Interest rate of 3%. The operating company can apply their own rate by setup of their IBR rate for the relevant currency (usually USD) with the interest name OPTVAL. The calculation of Gamma value is Gamma X No. of lots / 10, Theta value is Theta X No. of lots X 100. Gamma and Theta factors are reported as rounded to 4 decimal places whereas the corresponding values are calculated applying full decimal places.
NOTE 4: The ‘Options Valuation’ application logic was designed by a technologist employed by one of Hivedome’s clients (E D & F Man )
Contents of OPTREP - Terminal Options Report
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Other Greeks
Public Sub McOptV(F As Double, K As Double, T As Double, V As Double, R As Double, _ Cp As String, CalcType As String, Steps As Integer, _ Px As Double, Delta As Double, Gamma ...
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Delta Calculator
Public Sub McDelta(Fprice As Double, Days As Double, Strike As Double, Cp As String, Prem As Double, Vol As Double, Delta As Double) ' CALCULATES ,delta etc using Black / Scholes algorithm ' FPRICE - ...