heres the case:
I sell an index option Call 400 for €3400
I buy 3 index options Call 500 for €900 each.
profit formula (x being the Index at the enddate):
-1*3400+(-1*(x-400(with min 0))*100+ 3*900+(3*(x-500(with min 0))*100)
the cost to take this position is -1*3400 + 3* 900 = -700 this means i receive €700.
the value of the position at exercise is determined by the index. hypothetically we assume it goes up beyond the Break Even Point of 545.45 to lets say 560. this means we gain money (€2700)
how do i calculate my % Gained?
normally its buy for 2000 sell for 2500 = (2500-2000)/2000*100 = 25% gained
but in this case its: (2700--700)/-700*100 = -496% profit
(note the double -)
this makes no sense, a negative % gain while i receive money... what am i doing wrong?
I sell an index option Call 400 for €3400
I buy 3 index options Call 500 for €900 each.
profit formula (x being the Index at the enddate):
-1*3400+(-1*(x-400(with min 0))*100+ 3*900+(3*(x-500(with min 0))*100)
the cost to take this position is -1*3400 + 3* 900 = -700 this means i receive €700.
the value of the position at exercise is determined by the index. hypothetically we assume it goes up beyond the Break Even Point of 545.45 to lets say 560. this means we gain money (€2700)
how do i calculate my % Gained?
normally its buy for 2000 sell for 2500 = (2500-2000)/2000*100 = 25% gained
but in this case its: (2700--700)/-700*100 = -496% profit
(note the double -)
this makes no sense, a negative % gain while i receive money... what am i doing wrong?