Options Calculator

Owned by IT Support
Last updated: Jan 03, 2023
7 min read

Work Flow

  1. Upload paper trades data into the system every day and allocate them into portfolios, and system will convert them into positions https://mafint.atlassian.net/wiki/spaces/MCUGX/pages/2022735971

  2. Maintain and save underlying price of the trades in the Proprietary Market Data page https://mafint.atlassian.net/wiki/spaces/MCUGX/pages/2022736160

  3. Calculate the option price through the option calculator function and save it in the Proprietary Market Data page https://mafint.atlassian.net/wiki/spaces/MCUGX/pages/2069233665

  4. For the rest, the system will calculate P/L, positions, etc. based on the saved price, volatility, Greeks completed in above steps

The Option Calculator function is used for calculating settlement price and greeks based on specific option pricing formula.

1. To access the options calculator page, please click on Trades from the navigation sidebar on the left, followed by Paper Trades,

and click on the OPTION CAL tab.

2. Please refer to point 3 below to learn how to use the option calculator function. Otherwise, you may opt to input your data manually in this section as follows:

Please click on the + New Trade button to enter the data manually. All fields in red are compulsory to be filled. In order to distinguish the auto-filled open contracts (refer to point 3) and manually input rows, when you click on + New Trade to enter data, the green borders will be shown in the newly added rows.

 

 

Description:

  • Code: The option contract code of your choice

  • Name: Once Code has been selected, the option contract name will be auto-filled

  • Month: The option contract’s expiration month

  • Year: The option contract’s expiration year

  • C/P: Call/Put

  • Strike: Strike price

  • Date: Will be auto-filled according to the Settlement Date (default is today’s date, you may change as necessary)

  • Settlement: Settlement price of the option contract you selected on the set settlement date

  • Underlying Price: Closing price of the underlying contract on the current day, obtained from Market Data

  • Spot Price: Will auto fill according to Underlying Price; otherwise, you may input the Spot Price accordingly

  • Sigma (%): Implied volatility

  • TTM: The number of days from the settlement date to the last trading day of all trading days (excluding weekends), you may edit as necessary

  • POC: The total number of trading days of the selected option contract in the expiry month, you may edit as necessary

  • Delta : Delta value represents the fluctuation of the option price or option premium due to the change of the underlying futures price.

  • Gamma : Gamma value is defined as how Delta itself changes with the change of the underlying futures price. Please regard Gamma as the Delta of Delta.

  • Theta: Theta measures the sensitivity of an option to time. Theta is usually expressed as a negative number.

  • Vega : Vega is used to measure the sensitivity of an option to implied volatility.

Once all required fields are filled, please tick the row and click on Save Changes at the bottom left of the page to save your data into the Proprietary Market Data page. You may proceed to the Market Data>Proprietary Market Data table to view your saved options data (settlement price, DELTA , GAMMA , THETA , and VEGA obtained through the option calculation formula)

3. To proceed with the option calculator function, please refer to the following steps to input your parameters:

Step 1: Choose Product and Settlement Date

Please select the option contract (such as SGX/FEFO) from the Product drop-down list, and the settlement date in the Settlement Date field (the default is today), and click on + Open Contract. All open contracts related to your selected Product and Settlement Date will be automatically displayed in the table

If these details are already input when creating Paper Trades, clicking on + Open Contract will auto fill these fields:

  • Code

  • Name

  • Month

  • Year

  • C/P

  • Strike

  • Date

  • Underlying Price

 

Step 2: Set Last Trading Day and Year Days (the number of days in the year).

Please select the type of last trading day in the Last Trading Day drop-down list, such as CMLBTD (current month last business trading day, connected to Platts), and enter the total trading days of the year in the Year Days field (the default is 365 days), you may edit as necessary.

Please click on the blue Calculate button next to Years Days to perform the calculations, and the TTM (expiry days) and the POC (contract trading days of the current month) will be automatically filled in the table. Please note that Month and Year data must be filled for this Calculate function to work.

  • TTM: The number of days from the settlement date to the last trading day of all trading days (excluding weekends), you may edit as necessary

  • POC: The total number of trading days of the selected option contract in the expiry month, you may edit as necessary

Step 3: Input Risk Free Rate (%) and Cost of Carry Commodities %

  • RFR %: Risk-Free Interest Rate %, after the first entry, it will be automatically saved and displayed by default after the first input, you may edit it as necessary

  • COC%: Cost of Carry Commodities %, after the first entry, it will be automatically saved and displayed by default after the first input, you may edit it as necessary. If the underlying product is a futures contract, this is 0.

Step 4: Set the Spot Price and Implied Volatility (Sigma %)

  • Spot Price: You may input manually or tick AUTO SP at the top right corner above the table to automatically fill the spot price based on the Underlying Price

  • Sigma %: Please enter the defined implied volatility (Sigma % value) in the table

Step 5: Set the Option Pricing Formula

Please select the pricing formula from the Option Pricing Formula drop-down list. Only TURNBULL-WAKEMAN ASIAN is available, if other formulas are required, please contact us at support@mafint.com.

Introduction - TURNBULL-WAKEMAN ASIAN

The Turnbull–Wakeman formula is a well-known formula for continuous arithmetic average rate options.

In many commodity and energy markets where Asian options frequently trade, the average is typically based on futures or forward prices, that is to say, the cost-of-carry for the underlying asset is zero. Options on stocks can also have a cost-of-carry of zero. If the continuous dividend yield is equal to the risk-free rate, then the extension given in this note can be used in that case as well.

Turnbull-Wakeman was developed not only for Asian options with non-zero holding costs, but can also be extended to hold options on futures (with zero holding costs).

In 2017, the European Energy Exchange announced that they had switched from using the Black-76 formula (Black 1976) for settling freight futures options to the Turnbull–Wakeman formula. From 2018 on, the European Energy Exchange has been settling both freight futures options and iron ore options based on the modified Turnbull–Wakeman formula.

Please click on the Calculate button next to Option Pricing Formula, and the following will be automatically calculated.

  • Settlement Price: Settlement price of the option contract you selected on the settlement date

  • Delta : Delta value represents the fluctuation of the option price or option premium due to the change of the underlying futures price

  • Gamma : Gamma value is defined as how Delta itself changes with the change of the underlying futures price. Please regard Gamma as the Delta of Delta

  • Theta: Theta measures the sensitivity of an option to time. Theta is usually expressed as a negative number

  • Vega : Vega is used to measure the sensitivity of an option to implied volatility

 

Once all required fields are filled, please tick the row and click on Save Changes at the bottom left of the page to save your data into the Proprietary Market Data page. You may proceed to the Market Data>Proprietary Market Data table to view your saved options data (settlement price, DELTA , GAMMA , THETA , and VEGA obtained through the option calculation formula). This data can be viewed in various models/reports in the Dashboard such as Portfolio Top View etc.

If the product is an options, the Row_Key will indicate Month/Year/C or P/Strike Price.

Delta = Existing Delta * Delta Coefficient (if delta coefficient is not set up, it will remain as the existing delta)