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.
Entities trading Options need two specific pieces of data, which can be populated using Create/Edit Entity.
Net Option Positions (639)
No
: long and short positions in the same contract are held separately, with units always positive in Eagle AccountingShort positions have negative units in Data Management
Transaction elections are Buy, Write, Sell, and BuytoCover
Yes
: long and short positions in the same contract are netted together, allowing a trade to cross zero and bring the position from long to short or vice versaShort positions are represented by negative units in both Eagle Accounting and Data Management
Transaction elections are Buy and Sell
Options and Futures Expiration Delay Days (12101): number of days to delay automatic expiration
When NULL or zero, Eagle Accounting will auto-expire the Option on expiration date
When populated, the expiration event can only be processed on the adjusted date
Example: if Options and Futures Expiration Delay Days = 3 and expiration date = 2022-01-21, the expiration can only be processed on 2022-01-24
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, orOPOPIX
for an INX OptionPrice 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 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 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) |
|
|
|
|
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) |
---|---|---|---|---|
Call or Put | Purchased | 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 | 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.
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
To categorize derivatives for insurance reporting, such as the Schedule DB, Derivative Elections (56) must be set toHedging Effective
, Hedging Other
, Income Generation
, Replications
, or Other
on all trades. Leaving the default of Trade
will prevent the transaction from appearing on insurance reports.Data Management Reporting
General Reporting (Eagle OLAP)
OLAP reports provide the maximum level of customization, allowing any column in Data Management to be pulled into a report. These go beyond the Eagle Accounting Grid Reports because they are not limited by core queries, can support multiple sources and various types of calculations, and provide drill-down functionality based on user-defined groupings.
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
Option SMFs and trades can be loaded through the standard Message Center (MC) streams. The SMF must be loaded prior to the trade (trades do not spawn SMFs). Refer to https://eagledocs.atlassian.net/wiki/spaces/GENERICINTER/overview for more information.
Net Option Positions =
Yes
: short positions are maintained using standard Buy and Sell transactions; set Event Type (55) =BUY
orSELL
Net Option Positions =
No
: short positions are maintained using Write and BuytoCover transactionsSet Event Type =
WRITE
orBUYCVR
to process these trades through 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 | |
Trade Open | eagle_default_in_csv_trades OR | ||
Partial/Full Close | eagle_default_in_csv_trades OR | ||
Index Option | SMF Setup | eagle_default_in_csv_smf | |
Trade Open | eagle_default_in_csv_trades OR | ||
Partial/Full Close | eagle_default_in_csv_trades OR |
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