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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 held directly. 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

On this page

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IE Formatting Notes
IE Formatting Notes

Example reference data screens, trade screens, and reports are attached:

  • View file
    nameOption on EQ Example.xlsx

  • View file
    nameOption 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): OPOPEQ for an EQ Option, OPOPDB for a FI Option, or OPOPIX for an INX Option

  • Price Multiplier (18): 1.00 for an EQ or INX Option, 0.01 for 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 reached

    • European: contract can be exercised or assigned on expiration date only

    • Bermudan: 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 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 > Long

Open > Short

Close > Long

Close > Short

Event Type (55)

BUY

WRITE

SELL

BUYCVR

Long-Short Indicator (15)

L (LONG)

S (SHORT)

L (LONG)

S (SHORT)

Net Option Positions (639) = No

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) = Yes

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)

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

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

Put

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

-

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

Call

Purchased

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 * contract size * underlying open price * price multiplier

# of contracts exercised * contract size * (underlying open price - strike price - option open price) * price multiplier

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

-

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 * contract size * underlying open price * price multiplier

# of contracts exercised * contract size * (underlying open price - strike price + option open price) * 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.

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.

Include Page
Options Global Processing Notes
Options Global Processing Notes

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

Include Page
Derivatives Insurance Reporting Processing Notes
Derivatives Insurance Reporting Processing Notes

Data Management Reporting

Include Page
General Reporting (Eagle OLAP) Processing Notes
General Reporting (Eagle OLAP) Processing Notes

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 Enrichment User Guide 2015.

  • View file
    nameEGIE_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
    nameEGIE_020 EQ-FI-INX 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

Equity Option



SMF Setup

eagle_default_in_csv_smf

View file
nameOPEQ_SMF.csv

Trade Open

eagle_default_in_csv_trades OR
eagle_default_in_csv_all

View file
nameOPEQ_TC.csv

Partial/Full Close

eagle_default_in_csv_trades OR
eagle_default_in_csv_all

View file
nameOPEQ_Partial_Close.csv

Index Option



SMF Setup

eagle_default_in_csv_smf

View file
nameOPINDX_SMF.csv

Trade Open

eagle_default_in_csv_trades OR
eagle_default_in_csv_all

View file
nameOPINDX_TC.csv

Partial/Full Close

eagle_default_in_csv_trades OR
eagle_default_in_csv_all

View file
nameOPINDX_Partial_Close.csv