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Can someone help me understand EUREX EUR/USD Options?
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Can someone help me understand EUREX EUR/USD Options?

  #1 (permalink)
Trading Apprentice
Athens Greece
 
Futures Experience: Beginner
Platform: DeGiro
Favorite Futures: -
 
Posts: 2 since Oct 2015
Thanks: 1 given, 0 received

Can someone help me understand EUREX EUR/USD Options?

I have trouble understanding how those options are priced. To be more specific, I'll give an example.

I buy the following option:

PUT EUR/USD (Buy USD, Sell EUR)
Strike Price: 1.10
Expiry Date: 01 MARCH 2016
Price: $0.02625
Contract Size: EUR 100,000


Actually, if I input price 0.02625 and quantity 1 to my online broker, it presents me as final price: $2.625, so I suppose that I buy 100 contracts (and therefore I have the right to buy 11,000,000 USD for 10,000,000 euros)

Now suppose that on 01 March 2016, the current rate is 1.05 USD for 1 EUR. According to the data above, how much should my profit be? I would expect it to be:
USD 500,000 from the formula: (100 contracts)*[(100,000 EUR)*(1.10 USD)-(100,000 EUR)*(1.05 USD)]

On the other hand, it's impossible to make such a profit with a $2 investment, so what have I understood wrong about those options?

For more info about the options I'm asking about, you can check the EUREX FX Options webpage (can't post it here due to junk filter).

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  #2 (permalink)
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  #3 (permalink)
Elite Member
Zurich, Switzerland
 
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Platform: NT
Favorite Futures: Ukulele
 
Posts: 16 since Mar 2011
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Hi @cbpapi,

the cost for options based on futures are different calculated than for equity based options.
You only buy 1 option for 1 future contract - there is no multiplication by 100 (by default).



For the FX option you refrence, eurex is stating the following:


Quoting 
Price quotation and minimum price change

The price quotation is determined as a decimal number with five decimal places. The minimum price change is 0.00005, equivalent to a value of five units of the quote currency.


This mean with 1 FX option you get the right to exercise for 1 Lot (100.000 €) of FX Futures.
To calculate the €-value of the option you have to multiply the option price with the Tick value of the futures contract (0.0001 price change = 10€)

therefore you have to pay 2625 for an option value of 0.02625.


hope this helps
askerix

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  #4 (permalink)
Trading Apprentice
Athens Greece
 
Futures Experience: Beginner
Platform: DeGiro
Favorite Futures: -
 
Posts: 2 since Oct 2015
Thanks: 1 given, 0 received


askerix View Post
Hi @cbpapi,

the cost for options based on futures are different calculated than for equity based options.
You only buy 1 option for 1 future contract - there is no multiplication by 100 (by default).



For the FX option you refrence, eurex is stating the following:




This mean with 1 FX option you get the right to exercise for 1 Lot (100.000 €) of FX Futures.
To calculate the €-value of the option you have to multiply the option price with the Tick value of the futures contract (0.0001 price change = 10€)

therefore you have to pay 2625 for an option value of 0.02625.


hope this helps
askerix

Your response was indeed very helpful. Thank you!

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