On Mon, Apr 24, 2000 at 12:12:59PM -0500, [EMAIL PROTECTED] wrote:
> Rob Walker <[EMAIL PROTECTED]> writes:
> > Also, before this gets implemented, I think there should be some
> > thought put into stock options, for we may end up redoing a lot of
> > work after we finish this part, and then move on to stock options.
>
> This is probably a good idea, but someone more familiar with options
> will have to speak up here...
Hmm... i'm reasonably familiar with both stock options, and futures and
futures options. I'm not that familiar with the gnucash engine though.
A brief description, as i understand it, please bear in mind that i'm
neither an accountant nor a tax professional.
A stock option is an option to purchase stock at a specified price. Options
have an expiration date. When you purchase an option it is pretty much like
buying stock. However, some extra information needs to be recorded. To
fully record an option purchase, you need to record the underlying stock
that the option is on, the strike price (i.e. the price that the underlying
stock can be purchases for), an expiration date, and whether the option is a
put or a call. A put option is the option to sell stock at the strike
price, and a call option is the option to purchase stock at the strike
price.
Once an option is bought, it can have one of three dispositions: it can be
sold, in which case, it is pretty much just like a stock transaction. It
can expire, in which case the option is worthless, and (IIRC) can be/is
treated as a sale at a zero price. Thirdly, it can be exercised, which is a
single transaction where by stock is purchased at the strike price, and the
option becomes worthless.
Another point: with standardized options one option contract represents the
ability to purchase (with a call option) or sell (with a put option) 100
shares of the underlying stock.
That describes buying options. One can also short options. The accounting
should be analogous, except that one starts with a sale.
The chicago board of options exchange (http://www.cboe.com/) has a pretty
good introduction to options trading. And i can try to answer any
questions. FWIW, i have been trading options for about two years, and
futures (and futures options) for about a year and a half.
I can go into futures later, if there is any interest.
--
Chance is irrelevant. We will succeed. -- Seven of Nine
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