Listed Options

Definition

A listed option is a forward transaction traded on a forward exchange, which is binding for one party. It has a standardized issue structure. You enter the standardized contract elements in the class master data . Unlike futures, the risk is not evenly distributed in this case. The purchaser (owner of long position) of an option has the right to exercise. The purchaser must pay the seller an option premium for this right. The vendor (writer, owner of the short position) must fulfill the conditions of the transaction if the purchaser exercises it.

The differing risk for long and short influences the collateral provisions that the counterparties have to make.

There are two methods:

  • Normal style

    • The purchaser (long) of the option bears no risk, he makes no collateral provision. For each of his long positions, he receives a contribution credit that is offset against his short positions.

    • The seller (short) has to pay a premium margin. This margin must offset the loss that would arise if he were to sell the position today. If the price is such that as the loss of the seller rises, the seller must increase the collateral provision.

  • Future style

    With DTB options on the DAX future and DTB options on the BUND future and BOBL future, you do not pay the option premium immediately. More often, the daily settlement price is determined and the difference is offset directly as profit and loss. As this settlement method is the same as that for futures, it is called future style . As both sides of the transaction bear a risk, both must provide collateral.

Structure

By choosing Start of the navigation path Master Data Next navigation step Listed Derivatives Next navigation step Class, End of the navigation path you can create, change and display the following options as a Class in the system:

  1. Stock option

    The purchaser of a stock option has the right to receive a fixed number of stocks of a class at a fixed price (call option) or to dispose of them (put option). If a purchaser exercises an option, the clearing house of the forward exchange assigns a vendor to the purchaser randomly. The assigned vendor is then exercised by the clearing house. Part exercise of positions is possible.

  2. Index option

    A purchaser of a stock index option has the right to buy (call option) or sell (put option) a block of stock corresponding to the index at a fixed price. Since it would not be possible to settle the security transaction when it is exercised, these types of options are usually exercised by means of a cash settlement.

  3. Future option (bond)

    When you purchase a futures option, you have the right to purchase a futures contract (call option) or sell one (put option) up to the expiration date. When exercising the option, the purchaser of a put option has a short position, and the purchaser of a call option has a long position.

    With these options, the premium is not paid upon purchase. The option is settled future style.

  4. Option on an index future

    Trading of this product is currently not possible on the DTB (Deutsche Terminbörse = German Forward Exchange).

  5. Option on a Commodity Future

Note: When you define the product type in Customizing, you specify the option category.

See also:

Editing a Class

Use

There are four basic positions:

  • Long call = the right to purchase the underlying from the owner of the short call position at the basis price agreed in advance. The investor hopes for increasing prices. He will exercise the option as soon as the market price exceeds the basis price as he can then purchase at below the market price.

  • Short call = the obligation to deliver the underlying to the owner of the long call position at the price agreed in advance. The investor hopes for prices that remain the same or fall slightly so that the option becomes worthless. The option is not exercised. The investor can collect the premium option as a yield improvement of his portfolio in the case of a covered call.

  • Long put = the right to deliver the underlying to the owner of the short put position at the price agreed in advance. The investor hopes for falling prices. He will exercise the option as soon as the market price falls below the basis price as he can then sell at above the market price.

  • Short put = the obligation to take the underlying from the owner of the long put position and to pay the basic price agreed in advance. The investor hopes for prices that remain the same or increase slightly so that the option expires worthless and he receives the option premium.

See also:

You specify whether a put or call is involved in the contract details.

Procedure

Entering Basic Data

To create a listed option, you must fill the following fields:

  • Exchange (issuer, calendar)

  • Dates (last traded on, expiration date, settlement date)

  • Tick (tick amount, tick value)

  • Contract details (put/call, number of units, strike amount, securities index, etc.)

Header data, such as the option category and settlement, is based on Customizing settings.

Other Tab Pages
Additional Functions

  • Check

    This checks the class for consistency. Any errors that occur here are displayed in a dialog box. The same checks are carried out when you save the class.

  • Reset

    This function is available in the change mode. It resets the class data to the status it had just after it was last saved.

  • References

    This function lists the classes that use the current security ID number as the underlying.

    Class: Reference

  • You can branch to the Issuer data of each business partner from the class data. To do this, choose Start of the navigation path Environment Next navigation step Display Issuer End of the navigation path .

  • You can display the change documents for the class data by choosing Start of the navigation path Environment Next navigation step Change Documents End of the navigation path .

  • The class status is displayed at the top right-hand side of the screen. You can either change the status there or choose Start of the navigation path Edit Next navigation step Change status. End of the navigation path A class can have the status obsolete, inactive, or active.

Save your entries before you leave the class data.