Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › How to calculate gain on option ?
- This topic has 4 replies, 2 voices, and was last updated 4 years ago by John Moffat.
- AuthorPosts
- March 8, 2020 at 7:52 am #564874
Dear John,
I am very confused with the caluation of gain on option when doing questions in interest rate options.
There were two types of Answers in calculation of gain on option, the first is (strike price – future price)??contract size??No.of contracts??3/12. ie. Keshi, Q2 Dec 2014.
The second method is (strike price – future price) ??10000??tick value??No.of contracts. ie. Armstrong, Q2 Sep/Dec 2015.
The first type answer is easy to understand and is same as the example question on the lecture you post. But I cannot figure out the second types of question.
Thanks.
March 8, 2020 at 7:58 am #564876I am sorry for that mistake, the error above should be “multiply”.
March 8, 2020 at 12:55 pm #564894The tick value is the gain or loss for movement of 0.01 for one contract (so contract size x 0.01 x 3/12_
I explain it in full in my free lectures, but (as I say in the lectures) you never actually need to use ticks in the exam. I never bother using ticks even if the tick value is given in the question.
March 8, 2020 at 2:00 pm #564897Thank you so much, John. I am clear right now. Have a good day.
March 8, 2020 at 6:45 pm #564918You are welcome, and you have a good day also 🙂
- AuthorPosts
- The topic ‘How to calculate gain on option ?’ is closed to new replies.