Advertise with us (we do not endorse any site advertised)

Author Topic: Call option calculation  (Read 9806 times)

0 Members and 1 Guest are viewing this topic.

Offline btcmanTopic starter

  • Newbie
  • Joined: Mar 2013
  • Posts: 1
  • Karma: +1/-0
    • View Profile
Call option calculation
« on: March 10, 2013, 09:31:13 PM »
I am a n00b with everything regarding to options, and I am trying to understand the calculations behind a "Call option" which is traded on coinbr.
For example O.BTCUSD.C470T
This option enables me to buy 1 BTC for 47 USD at any time until the expiration time (last Friday midnight UTC of This month).

If the price at some point before the expiration is 60 USD, I could request to execute the option and then I get 60-47=13 USD translated to BTC, which is 13/60=0.2166 BTC.

If the price of of the option was 0.096153846, I get to "break even" on the price of 52 USD:
52-47=5 USD translated to BTC is 5/52=0.096153846.

My questions are:
1. Are these calculations correct?
2. Where do I find the BTC/USD rate which this option depends on?
3. How do I execute the option?

Thanks!


Offline CoinBr

  • Newbie
  • Joined: Jan 2013
  • Posts: 34
  • Country: 00
  • Thanked: 1 times
  • Karma: +3/-0
  • First online MPEx broker
    • View Profile
    • CoinBr.com
  • #otc: jurov
  • Bitcoin Address: 1CoinBr662GWdiqVz8mXJUnYjWZbBchKAb
Re: Call option calculation
« Reply #1 on: March 11, 2013, 07:51:12 AM »
I am a n00b with everything regarding to options, and I am trying to understand the calculations behind a "Call option" which is traded on coinbr.
For example O.BTCUSD.C470T
This option enables me to buy 1 BTC for 47 USD at any time until the expiration time (last Friday midnight UTC of This month).

If the price at some point before the expiration is 60 USD, I could request to execute the option and then I get 60-47=13 USD translated to BTC, which is 13/60=0.2166 BTC.
Correct. This is shown as "intrinsic value" on exercise page.
If the price of of the option was 0.096153846, I get to "break even" on the price of 52 USD:
52-47=5 USD translated to BTC is 5/52=0.096153846.
Yes. See the formulas below.
My questions are:
1. Are these calculations correct?
2. Where do I find the BTC/USD rate which this option depends on?
It's 24h weighted USD price from bitcoincharts.
3. How do I execute the option?
After having bought the option, Exercise link appears in balances table on dashboard. However, MPOE bot usually prices the options such that it's slightly more profitable to sell them than to exercise, you can check that yourself.

Offline CoinBr

  • Newbie
  • Joined: Jan 2013
  • Posts: 34
  • Country: 00
  • Thanked: 1 times
  • Karma: +3/-0
  • First online MPEx broker
    • View Profile
    • CoinBr.com
  • #otc: jurov
  • Bitcoin Address: 1CoinBr662GWdiqVz8mXJUnYjWZbBchKAb
More assorted options wisdom
« Reply #2 on: March 11, 2013, 08:08:25 AM »
Planned to do add page on them, but dunno when, with everything happening around..

BTCUSD - 24h weighted USD price from bitcoincharts

Calls
Profits if price rises above strike, otherwise exercises worthless.
 Profit on exercise in BTC: (BTCUSD-strike)/BTCUSD
Break even BTCUSD point: strike/(1-buyprice)

Puts
Profits if price gets below the strike, otherwise exercises worthless.
 Profit on exercise in BTC: (strike-BTCUSD)/BTCUSD
Break even BTCUSD point: strike/(1+buyprice)

Expiry
Last Friday in the month, midnight UTC are all *T options exercised automatically according to then current BTCUSD. All *N options are renamed to *T options.

Going short
MPEx enables two ways to create options, which you can then sell short:

MKOPT - creates options of one mpsic, needs collateral:
  • Each CALL requires 1 BTC of collateral irrespective of strike.
  • Each PUT requires an amount of collateral equal to strike / spot BTCUSD + some MPEx-proprietary padding.
There is 2% fee.

SPLIT - creates CALL-PUT pairs at given strike. The given BTC amount is divided in half, one half used as collateral for calls and other one for puts according to same rules as MKOPT. There is no fee.

On expiry, unused collateral is automatically returned. At the moment, CoinBr does MKOPT/SPLIT manually on e-mail demand without additional fee.
« Last Edit: March 31, 2013, 06:51:06 PM by CoinBr »


 

Automatic exercise + MPOE option renaming

Started by smies

Replies: 4
Views: 11464
Last post August 22, 2017, 03:16:44 PM
by Key
Option naming scheme docs

Started by cryptal

Replies: 3
Views: 7173
Last post August 22, 2017, 07:47:39 PM
by Key
Clarification on automatic expiry of option?

Started by locksley

Replies: 2
Views: 4895
Last post August 22, 2017, 07:19:17 PM
by Key

your ads here