notional value of a call option
I have some call options that are in the money and I'm trying to work out the calculation the platform uses to calculate absolute exposure.
Open = 3.55
Close = 5.35
contracts = 8
They arrive at absolute exposure = k (roughly).
My calculations give:
Net spend = 40
Notional value = market price of underlying X # contracts X multiplier (i.e. 100)
However this gives me a figure that is much higher than k
I've also considered using # contracts X strike X multiplier but again it's way to high a figure.
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Try further multiplying your calculation by the delta of the option. This will provide an effective leveraged position value in the underlying. That is, your dollar exposure to incremental moves in the underlying is as if you had a k plain long position.
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