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Hi, for sample answer, under “using the collar”, I noticed that for the loss on exercise, it is calculated as “76 x 25 x 50 = 95000”. The basis point 76 is used. Similarly, under “Options”, for the gain on options, the 24 basis point is used. Please may I know whether in such situations where we need to calculate the gain/loss on exercising the contract, we need to use basis point, instead of percentage? Because if I use percentage, it will be 0.76% x 25 x 50 = 9.5 only.
Please advise. Thank you.
By all means use a %, but if you do the the calculation is 0.76/400 x 1,000,000 x 50 = $95,000.
Have you watched my lectures and in particular how tick values are calculated? You either use ticks or you do it the way I have just written.
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