I think I'm doing something wrong - help with options calculation

[are02]

I'm learning about options (from the ASX course), think I understand the basics and am interested in buying options in the XJO index.

As a test calculation, I want to model the financial impacts of hedging the XJO both ways - for both a drop and a rise. Yet the profit numbers come out too high to be true - can anyone help me understand what I'm doing wrong?


Calls / Puts from Commsec - I've used the Offer values for my caluclation



Example 1 - XJO moves 1% up, $500 investment = $11,834 profit.

	Exercise	Cost	Date
Call	6700	1.01	21-Jan
Put	6700	1.3	21-Jan
Current Price		$ 6,683.00
Movement		1%​
Price post movement	6749.83​
Purchase Amt		$ 500.00
Result
	50% split
	Bought	Value per option	Value Tot
Call	247.5248​	49.83​	$ 12,334
Put	192.3077​	-49.83​	$ -
		Total	$ 12,334
End Position	$ 11,834

Example 2 - XJO moves 1% down, $500 investment = $17,111 profit.

	Exercise	Cost	Date
Call	6700	1.01	21-Jan
Put	6700	1.3	21-Jan
Current Price		$ 6,683.00
Movement		-1%​
Price post movement	6616.17​
Purchase Amt		$ 500.00
Result
	50% split
	Bought	Value per option	Value Tot
Call	247.5248​	-83.83​	$ -
Put	192.3077​	83.83​	$ 16,121
		Total	$ 16,121
End Position	$ 15,621

Help?!

 

[are02]

I suspect that although the Commsec offer prices show as ($), I need to multiply the premiums by 100 - is that what I haven't factored in?

 

[cutz]

The way Comsec represents pricing is wrong,

The midpoint on those XJOGO8's represented correctly is 101 ( as quoted now ), multiplier of 10 per specs sheet equals $1010 per contract.

Comsec website shows the midpoint as 1.01, you need to multiply the website representation by 1000 to get your correct premium per contract.

 

[Sharkman]

i find when trading XJO options it helps me visualise it by thinking of the premium in terms of points rather than $. Commsec is probably trying to shoehorn XJO into their existing systems by applying the 100 contract size and the $10 per point multiplier to come up with the prices they're showing, which i don't find all that helpful, but YMMV.

you multiply Commsec's prices by 100 to get the premium in terms of points eg. for your long 6700 straddle you're paying say 96 points for the calls and 125 points for the puts (i usually assume 1 or 2 ticks their side of the mid, since from experience, you can usually get that on the XJO or the major large caps, you don't have to cross the full spread). that's 221 points total, so your breakevens are 6479 and 6921, you need a blowup of that magnitude or larger within the option expiry to profit, a 1% move certainly won't do it.