In some answers, I got confused on Option premium calculation:
Eg: We have option on 3-month futures, Euro 1 mil contract size, tick size 0.01%, tick value Euro 25. Option premiums are in annual %:
Say, we buy calls option with premium = 0.032 / No. of contract = 50
=> Book's Answer: 3.2 x 25 x 50 = 4000 (=> kind of a short answer and I dont know where it is from)
I thought: 0.032% x (1mil x 3/12) x 50 = 4000
Though these 2 answers is the same but whether the most popular method for calculating is:
No. of Contract x Contract size x Opt.premiums % x Month-fraction?
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Option premium
8y ago#1It depends whether you prefer to use ticks or not. As you will know from my lectures, I never bother with ticks - there is no need.
Which way you show the workings in the exam does not matter :-)
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