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 = $70k (roughly).

My calculations give:

Net spend = $2840

Notional value = market price of underlying X # contracts X multiplier (i.e. 100)

However this gives me a figure that is much higher than $70k

I've also considered using # contracts X strike X multiplier but again it's way to high a figure.

  • What is the strike of the options and the underlying stock price? Are you long or short the options? Your net exposure for short ITM options should be something like (underlying-strike)*contracts*multiplier. – D Stanley Jan 22 '20 at 16:26
  • @DStanley I'm long calls, strike of 344 underlying is around 330. When I said ITM earlier, i meant in the sense that the platform shows positive P&L not that strike is > underlying yet (just for clarity). All the formulas I try just seem to give figures way above what the platform says so i'm confused. – VBACODER Jan 22 '20 at 16:28
  • Positive P&L just means that the options are currently worth more than you paid for them. Those options are currently out of the money and have no intrinsic value. Which "platform" are you talking about? Is there anything on their site that explains how "net exposure" is calculated? – D Stanley Jan 22 '20 at 16:40
  • Yes I know what it means, I was just clarifying. SaxoTraderGOplatform. It just says "Exposure is measured on the net position level in absolute terms" – VBACODER Jan 22 '20 at 16:41

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 $70k plain long position.


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