Pay special attention to underlined sections, as these highlight the most frequently encountered issues. Bold is used for navigation, modules, and screens. Italics are used for fields, tables, and errors. Fixed width indicates values for fields or code/text that should be entered. Tags are shown in parentheses (#) after field names.

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. Refer to Options Entity Setup Processing Notes for details.

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 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)

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.

Physical Settlement

Physical Short Settlement

Note: physical short settlement is not valid for written puts when the entity-level Net Options Positions = Yes.

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.

• V17 & Above: Accounting Center > Processing and Exceptions > Global Processes

  • Accounting Valuation: Unrealized Gain Loss Entries > Post Daily Fund Unrealized Gain Loss-Position

  • Data Management Valuation: Eagle STAR to Eagle PACE Direct Processing > Transfer Data - Batch

• Prior to V17: Global Process Center

  • Accounting Valuation: Unrealized Gain Loss Entries > Post Daily Fund Unrealized Gain Loss-Position

  • Data Management Valuation: STAR to PACE Direct Processing > Transfer Data - Batch

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

Data Management Reporting

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.

Automation

Sample messages for the standard interfaces are listed below.