Overview
Eagle supports end-to-end processing of Equity (EQ), Fixed Income (FI), and Index (INX) Options in V11.0 and all subsequent releases. This document covers the full lifecycle including Eagle Accounting, Data Management, and Performance. Also in-scope of this document are LEAPS, or long-expiration Options.
An EQ Option gives the holder the right, but not the obligation, to buy (call Option) or sell (put Option) a stated number of shares of an equity or exchange-traded fund at a fixed price until a stated expiration date. An FI Option is almost identical, giving the holder a right to buy or sell the underlying bond. An INX Option is the same as the other two up until the time of exercise or assignment; INX options can only be cash exercised as INX securities cannot be directly held in Eagle Accounting. The payouts are as follows:
- The writer (seller) of an Option receives a premium based on the Option price
- The buyer of a call is betting that the underlying equity’s or fixed income’s prices will rise above the strike price, allowing the Option to be exercised
- Conversely, the buyer of a put is betting that the underlying’s price will fall below the strike price, allowing the Option to be exercised
- In either case, the writer is betting that the Option will not be exercised and therefore expire worthless, allowing the premium to be recorded as a gain
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Example reference data screens, trade screens, and reports are attached:
Entity Setup
Before any trades can be booked, the target entity must be set up appropriately.
Reference Data
Storage & Configuration
Eagle has modeled Option security master files (SMFs) as single rows in Data Management.
Market Data
Because they are exchange-traded, Option prices and underlying security prices are readily available from a number of vendors.
Security Data
Options can be set up and maintained in Issue Viewer, Security Reference Manager (SRM), or Reference Data Center (RDC). The list below| Include Page | ||||
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Example reference data screens, trade screens, and reports are attached:
View file name Option on EQ Example.xlsx View file name Option on INX Example.xlsx
Entity Setup
Before any trades can be booked, the target entity must be set up appropriately. Refer to Options Entity Setup Processing Notes for details.
Reference Data
Storage & Configuration
Eagle models each Option security master file (SMF) as a single row in Data Management.
Market Data
Because they are exchange-traded, Option prices and underlying security prices are readily available from a number of vendors.
Security Data
Options can be set up and maintained in Issue Viewer or Reference Data Center (RDC). The list below contains all fields required to configure an Option SMF.
Issue Name (961)
Primary Asset ID (14) & Type (1432)
Processing Security Type (3931):
OPOPEQfor an EQ Option,OPOPDBfor a FI Option, orOPOPIXfor an INX OptionPrice Multiplier (18):
1.00for an EQ or INX Option,0.01for an FI Option (or whatever matches the underlying bond)Contract Size (19): # of shares (EQ/INX Option) or par value (FI Option) that each contract is entitled to
Issue Country (1418)
Asset Currency (85)
Expiration Date (38): date when Eagle Accounting will automatically expire the Option, unless the entity-level Options and Futures Expiration Delay Days field has been populated
Strike Price (67): price at which the Option can be exercised or assigned
Option Type (1142)
American: contract can be exercised or assigned at any time until expiration, assuming the strike price has been reachedEuropean: contract can be exercised or assigned on expiration date onlyBermudan: functions the same way as American in Eagle Accounting; this option exists for reference data purposes only
Put/Call Flag (1350)
Underlying Security (1347): select the appropriate underlying security based on the type of option
Trade Processing
Trades are entered using the Book Trade module once
entity and reference data have been configured. Enter the appropriate entity, security identifier, and trade (35)/settle (37) dates and click Submit to query for the security.
When you right-click
Net Option Positions = No
Open > Buy
This creates a long position (long with positive quantity) in Eagle Accounting.
Contracts (40)the security, the options for opening and closing it will depend on whether the entity-level Net Option Positions field is set to Yes or No.
Open & Close
The fields below are used for both opens and closes.
Contracts (40): number of contracts being transacted
Price Per Contract (45): multiplied by Contracts, Contract Size, and Price Multiplier (18) to calculate premium
Commission Per Contract (971): multiplied by Contracts to calculate Commission Amount Local (47), which is factored into the Net Amount fields
Tax Amount (46), SEC Fee (48), Stamp Duty Tax (51), & Other Fee (3752): added to the premium and commission to generate the total net amount
Broker (88)
Field | Open > |
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Long | Open > Short | Close > |
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This closes (partially or fully) a previously established long position, using the same fields as above.
Close > Buy to Cover
This closes (partially or fully) a previously established short position, using the same fields as above.
Net Option Positions = Yes
Open > Buy
This creates a long position (long with positive quantity) or closes a previously established short position (long with negative quantity), using the same fields as above.
Close > Sell
This creates a short position (long with negative quantity) or closes a previously established long position (long with positive quantity), using the same fields as above.
Accounting
Once an Option trade is booked, it will be picked up in Eagle’s global workflow. Accounting valuation is calculated when posting unrealized gain/loss and Data Management valuation is calculated in STAR to PACE. These can be scheduled or triggered manually.
Valuation
Options are valued using unit prices. The market value formula is:
- Market Value = # of Contracts * Contract Size * Price * Price Multiplier
Stock Split
The most common corporate action that affects EQ Option contracts is a stock split. If there is a 2:1 split on the underlying stock, each Option contract is entitled to twice as many shares at half the original strike. To process a stock split on an EQ Option in Eagle, start by creating a Stock Split Corporate Action Announcement. After querying for the appropriate EQ Option, populate the fields below as described.
- Sweep Date (1197): date when Eagle Accounting’s global corporate action process will pick up the Stock Split
- Ex Date (65): set to ex-date of the underlying equity (date after which a buyer will no longer be entitled to previously declared stock split); also the same as Effective Date
- Treatment of Fraction Shares (3965): European (requires From Shares and To Shares), Post Fraction Shares, Round Down, Round Up, or Round to Nearest Whole Share (requires Rounding Point)
- Corporate Action Status (54): select Released to initiate stock split when invoking the global corporate action process, or select Pending or Incomplete to simply store the stock split announcement
- Corporate Action Sub Priority (required to mark stock split as Released): order in which to process corporate actions with the same Ex Date (1 is first priority, 2 is second, etc.)
- Split Contract Size (1698, unique to EQ Options): select
Yesto maintain same number of contracts while changing Contract Size, orNoto change the number of contracts while maintaining Contract Size- Both elections will change information in the position object, but not the SMF (STAR to PACE reads Contract Size from the position object for Market Value calculations)
- The same applies to Strike Price: it will be adjusted on all open lots based on Split Ratio (1001), but not on the SMF
- You should have a security update process in place that also adjusts Contract Size and Strike Price on the SMF on Ex Date to ensure new trades are processed with the correct information
- Market value is the same post split regardless of which election is chosen; take a 2:1 split, where the holder has 100 contracts and contract size is 100:
- Split Contract Size =
Yes: after the split, Market Value = 100 contracts * 200 contract size * price = 20,000 * price - Split Contract Size =
No: after the split, Market Value = 200 contracts * 100 contract size * price = 20,000 * price
- Split Contract Size =
- Both elections will change information in the position object, but not the SMF (STAR to PACE reads Contract Size from the position object for Market Value calculations)
- Split Ratio (required to mark as Released): number of shares the holder is entitled to for each share they own; for a 2:1 stock split, enter
2 - Corporate Action Type (1728): Stock Split or Reverse Split. List can be maintained via Code Values
Use the Stock Dividends/Stock Splits global process to process the Stock Split, with a date range that includes Sweep Date entered above.
Exercise/Assign
Exercises and assignments are processed using Book Trade > Other > Exercise. By definition purchased Options are exercised and written Options are assigned, but they use the same process in Eagle Accounting.
Settlement
Options can be exercised or assigned using cash or physical settlement. Cash settlement has no effect on the underlying asset; it is simply an exchange of money based on the exercise price. Physical settlement (not available for INX Options) results in either opening or closing a position in the underlying asset.
Cash Settlement
Note: exercise price is the Price Per Contract entered on the Exercise screen. Example: a call Option has Strike Price = $20 and underlying price on exercise date = $30. Set exercise price = $10 to generate a cash receipt/disbursement of $10 per contract.
Purchased Call or Put
- Cash Receipt = # of contracts exercised * contract size * exercise price * price multiplier
- Gain (Loss) = # of contracts exercised * contract size * (exercise price - open price) * price multiplier
Written Call or Put
Cash DisbursementLong | Close > Short | |||
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Event Type (55) |
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Long-Short Indicator (15) | L (LONG) | S (SHORT) | L (LONG) | S (SHORT) |
Net Option Positions (639) = | Creates a long position (long with positive quantity). | Creates a short position (short with positive quantity). | Closes (partially or fully) a previously established long position. | Closes (partially or fully) a previously established short position. |
Net Option Positions (639) = | Creates a long position (long with positive quantity) or closes a previously established short position (long with negative quantity). | N/A | Creates a short position (long with negative quantity) or closes a previously established long position (long with positive quantity) | N/A |
Exercise/Assign
Exercises and assignments are processed using Book Trade > Other > Exercise. Technically, purchased Options are exercised and written Options are assigned, but they are processed the same way in Eagle Accounting. Options can be exercised/assigned on Expiration Date if the transaction is entered prior to the scheduled expiration job. You may need to move the expiration job to your EOD schedule to accomplish this.
Settlement
Options can be exercised or assigned using cash or physical settlement. Cash settlement has no effect on the underlying asset; it is simply an exchange of money based on the exercise price. Physical settlement (not available for INX Options) results in either opening or closing a position in the underlying asset.
Cash Settlement
Note: exercise price is the Price Per Contract (45) entered on the Exercise screen. Example: a call Option has Strike Price = $20 and underlying price on exercise date = $30. Set exercise price = $10 to generate a cash receipt/disbursement of $10 per contract.
Option Type | Transaction Type | Cash Direction | Cash Amount | Gain (Loss) |
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Call or Put | Purchased (Long) | Receipt | # of contracts exercised * contract size * exercise price * price multiplier | # of contracts exercised * contract size * (exercise price - option open price) * price multiplier |
Call or Put | Written (Short) | Disbursement | # of contracts exercised * contract size * exercise price * price multiplier | # of contracts exercised * contract size * (option open price - exercise price) * price multiplier |
Physical Settlement
Option Type | Transaction Type | Outcome | Cash Direction | Option Cash Amount | Underlying Cost or Reduced Cost | Underlying Gain (Loss) on Close |
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Call | Purchased | Establish a long position (buy the underlying asset). | Disbursement | # of contracts exercised * contract size * strike price * price multiplier | Cost = # of contracts exercised * contract size * (strike price + option open price) * price multiplier | - |
Call | Written | Decrease a long position (sell the underlying asset). This requires an existing long holding at the time of exercise. | Receipt | # of contracts exercised * contract size * strike price * price multiplier | Reduced Cost = # of contracts exercised * contract size * underlying open price * price multiplier | # of contracts exercised * contract size * (strike price - underlying open price + option open price) * price multiplier |
Put | Purchased | Decrease a long position (sell the underlying asset). This requires an existing long holding at the time of exercise. | Receipt | # of contracts exercised * contract size * strike price * price multiplier | Reduced Cost = # of contracts exercised * contract size * |
underlying open price * price multiplier |
# of contracts exercised * contract size * (strike price - underlying open price - |
option open price) * price multiplier |
Physical Settlement
Purchased Call: establishPut | Written | Establish a long position ( |
buy the underlying asset). | Disbursement |
# of contracts exercised * contract size * |
strike |
price |
* price multiplier |
Cost = # of contracts exercised * contract size * |
(strike price - option open price) * price multiplier |
Purchased Put: decrease a long position (Sell of the underlying asset, requires a long holding at the time of exercise).
- Reduced cost of long position = # of contracts exercised * contract size * open price * price multiplier
- Cash Receipt = # of contracts exercised * contract size * strike price * price multiplier
- Gain (Loss) = # of contracts exercised * contract size * (strike price - open price - price per contract) * price multiplier
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Physical Short Settlement
Note: physical short settlement is not valid for written puts when the entity-level Net Options Positions = Yes.
Option Type | Transaction Type | Outcome | Cash Direction | Option Cash Amount | Underlying Cost or Reduced Cost | Underlying Gain (Loss) on Close |
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Call | Purchased | Decrease a short position (buytocover the underlying asset). This requires a short holding at the time of exercise |
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Disbursement | # of contracts exercised * contract size * strike price * price multiplier |
Reduced Cost = # of contracts exercised * contract size * |
underlying open price |
* price multiplier |
Written Put: establish a long position (Buy of the underlying asset).
Cost =# of contracts exercised * contract size * (underlying open price - strike price - |
option open price) * price multiplier |
Physical Short Settlement
Note: physical short settlement is not valid for written puts when the entity-level Net Options Positions = Yes.
Put | Purchased | Establish a short position ( |
shortsell the underlying asset |
). | Receipt | # of contracts exercised * contract size * strike price * price multiplier | Cost = # of contracts exercised * contract size * (strike price - option open price) * price multiplier |
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Call | Written | Establish a short position (shortsell the underlying asset). | Receipt | # of contracts exercised * contract size * strike price * price multiplier |
Cost = # of contracts exercised * contract size * ( |
strike price |
+ option open price |
) * price multiplier | - |
Put | Written | Decrease a short position ( |
buytocover the underlying asset). |
This requires a short holding at the time of exercise. | Disbursement | # of contracts exercised * contract size * |
strike |
price |
* price multiplier |
Reduced Cost = # of contracts exercised |
Written Call: establish a short position (ShortSell of the underlying asset).
Cost =* contract size * underlying open price * price multiplier | # of contracts exercised * contract size * (underlying open price - strike price + option open price |
) * price multiplier |
Written Put: decrease a short position (BuytoCover of the underlying asset, requires a short holding at the time of exercise).
- Reduced cost of short position = # of contracts exercised * contract size * open price * price multiplier
- Cash Disbursement = # of contracts exercised * contract size * strike price * price multiplier
- Gain (Loss) = # of contracts exercised * contract size * (open price - strike price + price per contract) * price multiplier
Exercise/Assign Events
Eagle Accounting will automatically move the Option’s cost to the underlying security when the contract is exercised, via these events:
- Close the Option contract
- Open or close the underlying security position (long or short)
- Allocate Option cost or premium to the underlying security position
Canceling Exercise/Assign Events
Canceling an exercise or assign event requires the use of the Batch Cancel Trades panel. Query for the appropriate date range, entity, and security, then set Choose Trade to Cancel (962) = the target exercise/assign event. This will roll back the exercise/assign event by removing the action on underlying shares and restoring the original position. Option trades can be canceled using the regular Cancel Trade panel or rebooked using the Cancel & Rebook Trades module.Exercise/Assign Events
Eagle Accounting will automatically move the Option’s cost to the underlying security when the contract is exercised, via these events:
Close the Option contract
Open or close the underlying security position (long or short)
Allocate Option cost or premium to the underlying security position
Canceling Exercise/Assign Events
Canceling an exercise or assign event requires the use of the Batch Cancel Trades panel. Query for the appropriate date range, entity, and security, then set Choose Trade to Cancel (962) = the target exercise/assign event. This will roll back the exercise/assign event by removing the action on underlying shares and restoring the original position. Option trades can be canceled using the regular Cancel Trade panel or rebooked using the Cancel & Rebook Trades module.
Accounting
Once an Option trade is booked, it will be picked up in Eagle’s global workflow. Accounting valuation is calculated when posting unrealized gain/loss and Data Management valuation is calculated in STAR to PACE. These can be scheduled or triggered manually.
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Valuation
Options are valued using unit prices. The market value formula is:
Market Value = # of Contracts * Contract Size * Price * Price Multiplier
Corporate Actions
Refer to Equity Options Corporate Actions Processing Notes for details about processing stock splits, reverse stock splits, and spin-offs.
Expire
If the contract is not closed prior, Eagle Accounting will expire the Option on expiration date plus the number of days defined in the entity’s Options and Futures Expiration Delay Days election. Each contract's cost/proceeds are posted to realized gain/loss.
Reporting
STAR to PACE (S2P)
Almost all reports in Eagle leverage data from Data Management, which is populated by the S2P process. This will be scheduled as part of the daily workflow, but can also be triggered manually as described in the
Accounting section.
The S2P process creates a single row for each Option in the POSITION, POSITION_DETAIL, TRADE, and CASH_ACTIVITY tables.
The MARKET_VALUE_INCOME
column captures the total market value. Cash activity is appropriately signed based on whether the Option is bought or written.
Accounting Reports
Eagle has a core set of accounting reports that can be used to review Option information. These are designed to support the daily operational workflow for business users, allowing Grid Reports to be easily exported to Excel and customized to provide additional details as needed. Advanced Reports are intended to be client-facing and do not provide the same level of customization.
Insurance Reporting
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Data Management Reporting
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Performance
The performance toolkit calculates market value-based performance for Options using data supplied by the S2P process. However, this can be misleading because traditional market values do not capture an Option’s true exposure. Exposure-based analyses, which can be implemented using Eagle Enrichment, calculate more
meaningful returns. The documentation and .egl files linked below as attachments are available for beta testing. Additional details are available in Exposure Reporting Best Practices and the Eagle
View file name EGIE_020 EQ-FI-INX Options Delta-Adjusted Notional Exposure.egl Prices must be available for the underlying
Delta must be available for the Option in the SECURITYDBO.SECURITY_ANALYTICS.DELTA
View file name EGIE_020 EQ-FI-INX
Automation
Options Delta-Adjusted Notional Exposure - Inventory.xlsx
Automation
Refer to Options Automation Processing Notes for general information about options security setup and trade processing via Message Center.
Sample messages for the standard interfaces are listed below.
Instrument | Transaction Type | Default Message Center Stream | Sample Files | ||||
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Equity Option | SMF Setup | eagle_default_in_csv_smf |
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Trade Open | eagle_default_in_csv_trades OR |
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Partial/Full Close | eagle_default_in_csv_trades OR |
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Index Option | SMF Setup | eagle_default_in_csv_smf |
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Trade Open | eagle_default_in_csv_trades OR |
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Partial/Full Close | eagle_default_in_csv_trades OR |
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