THE ASX OPTIONS PROFILE The 'ASX Options Profile' spreadsheet is designed to help in the evaluation of option
strategies. One method of evaluating options strategies is to construct a payoff diagram,
The 'ASX Options Profile' can be used to depict the payoff diagram for a single strategy,
and also to compare the profiles of alternative strategies. To use the 'ASX Options Profile': 1. Open Microsoft Excel 2. Open the file named 'PROFILE.XLW. 3. Input the following information in response to the prompts in red type:
Example:
• type the premium paid/received per contract (in dollars and cents), followed by
'ENTER'. The premium should be entered as a positive amount, whether it is paid or
received.
• Type '1' under 'Number of shares/1000', followed by 'ENTER'. If your strategy involves a ratio of options to shares, rather than being on a 1:1 basis, you will need to adjust the 'Contract Ratio' accordingly. This will then show the profit/loss on a 'per share' basis. • Type the price of the stock, followed by 'ENTER'. Example:
5. Type the strike price to appear at the centre of the payoff diagram, followed by 'ENTER'. It will usually be suitable to select the strike price of one of the options being used to construct the strategy. 6. The program will automatically set a scale along the horizontal axis of the chart. However, there may be times when either smaller or larger intervals are required along this axis. In this case, the user can enter a value manually. It is best to use intervals that match the interval between strike prices of the options being used, or that can be divided into that interval. For example, for a stock where options are listed with strike prices 50 cents apart, a price interval of 50 cents or 25 cents would be appropriate. Avoid using an interval that is larger than the interval between the strike prices of the options being used. 7. Tab down until the 'Option Profile' Is visible. You are now looking at the profit and loss profile for the strategy you have entered in the section labelled 'Strategy 1 '. This profit/loss is shown on a 'per share' basis. If you have entered variables for a second strategy you can see profiles of the two strategies overlaid on one another, by typing Y in response to the 'Compare Strategies? prompt, followed by 'ENTER'. This feature enables you to compare breakeven points for alternate strategies being considered, and to see a comparison of the risks and rewards of those alternate strategies. Type 'N' then 'ENTER', or simply 'Delete' then 'ENTER', if you want to see Strategy 1 by itself again. 8. To print a copy of the option profile, double click on the profile to open it, then select 'PRINT' from the File Menu. Example One
Set option strike price to appear at upper centre of payback diagram:
$18.00 Example Two Assume that you are not sure whether to construct the spread using calls or puts, and would like to compare the payoff profile for the two alternatives. Under 'STRATEGY 1 ' you would enter details of the bull call spread as follows:
Under 'STRATEGY 2' you would then enter details of the bull put spread as follows:
Tab back to the payoff diagram. To see the two strategies overlaid on one another, respond to the prompt: Compare Strategy 2 with Strategy 1? (Y/N) y The ‘ASX Options Profile’ spreadsheet can be used to assist in evaluating strategies that are commonly trade in Australia. Users of the ‘ASX Options Profile’ spreadsheet should appreciate that the final result obtained from a given strategy will be influenced by movements in the market and the transaction costs in executing the strategy. In addition decisions which are unique to your own circumstances may need to be made. Although Australian Stock Exchange Limited believes that the ‘ASX Options Profile’ spreadsheet (including these instructions) is accurate, no warranty of accuracy or reliability is given. To the extent permitted by law, Australian Stock Exchange Limited, its subsidiaries and their employees shall not be liable for any loss or damage suffered by any person arising from any act or thing done or omitted to be done by any person in reliance upon all or part of the information contained in or the results produced by use of the ‘ASX Options Profile’ spreadsheet. THE ‘ASX OPTIONS PROFILE’ SPREADSHEET WAS "WRITE PROTECTED" WHEN ORIGINALLY ISSUED BY ASX. CARE SHOULD BE TAKEN TO ENSURE THAT THE FORMULAE USED ARE NOT AMENDED AS A RESULT OF REMOVAL OF THE WRITE PROTECTION FEATURE IN MICROSOFT EXCEL. The ‘ASX Options Profile’ spreadsheet is provided for educational purposes only and no person should invest monies or take or fail to take any other action in reliance upon the information contained in it or the results produced by its use but should instead satisfy themselves independently (whether by way of expert advice or otherwise) of the appropriateness of any such action or inaction. Except for a single copy of the program and guide held on a single computer’s hard disc, no part of the ‘ASX Options Profile’ spreadsheet (including these instructions) may be reproduced (other than for your own personal use) stored in an archival retrieval system, distributed over a network or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Australian Stock Exchange Your attention is also drawn to the General Conditions for the Derivatives Internet Site (www.asx.com.au/derivatives) which should be viewed in conjunction with this Disclaimer. |
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