Market Value - Real FX Position.
The Market Value section shows you total value for all assets sorted by currency. Accounts with the ability to transfer between brokers will also have an In Transit tab to monitor DVPs and other position transfers.
If you have strategies or models, view them by expanding a line, or use the drop-down selector to view values only for a selected model/strategy.
The following table defines the fields in the Market Value section. Note that not all available fields are displayed in the above image.
Open positions are grouped by currency.
Cash recognized at the time of trade + futures P&L.
This value reflects real-time current FX positions, including:
• Trades executed directly through the FX market.
• Trades executed as a result of automatic IB conversions, which occur when you trade a product in a non-base currency,
• Trades deliberately executed to close non-base currency positions using the FXCONV destination.
Total cash that has settled + futures P&L.
Reflects the current month's accrued debit and credit interest to date, updated daily.
Real-time mark-to-market value of stock.
Real-time mark-to-market value of securities options.
Real-time change in futures value since last settlement.
Real-time mark-to-market value of futures options.
Current funds balance.
The currency exchange rate to the base currency.
Net Liquidation Value.
Total cash value + stock value + options value + bond value.
The difference between the current market value of your open positions and the average cost, or Value - Average Cost .
Shows your profit on closed positions, which is the difference between your entry execution cost and exit execution cost, or.
(execution price + commissions to open the position) - (execution price + commissions to close the position) .
Forex - FX.
What is 'Forex - FX'
Forex (FX) is the market in which currencies are traded. The forex market is the largest, most liquid market in the world, with average traded values that can be trillions of dollars per day. It includes all of the currencies in the world.
There is no central marketplace for currency exchange; trade is conducted over the counter. The forex market is open 24 hours a day, five days a week, except for holidays, and currencies are traded worldwide among the major financial centers of London, New York, Tokyo, Zürich, Frankfurt, Hong Kong, Singapore, Paris and Sydney. The forex is the largest market in the world in terms of the total cash value traded, and any person, firm or country may participate in this market.
BREAKING DOWN 'Forex - FX'
Forex transactions take place on either a spot or a forward basis.
Spot Transactions.
A spot deal is for immediate delivery, which is defined as two business days for most currency pairs. The major exception is the purchase or sale of U. S. dollars vs. Canadian dollars, which is settled in one business day. The business day calculation excludes Saturdays, Sundays and legal holidays in either currency of the traded pair. During the Christmas and Easter season, some spot trades can take as long as six days to settle. Funds are exchanged on the settlement date, not the transaction date.
The U. S. dollar is the most actively traded currency. The euro is the most actively traded counter currency, followed by the Japanese yen, British pound and Swiss franc.
Market moves are driven by a combination of speculation, especially in the short term; economic strength and growth; and interest rate differentials.
Forward Transactions.
Any forex transaction that settles for a date later than spot is considered a "forward." The price is calculated by adjusting the spot rate to account for the difference in interest rates between the two currencies. The amount of the adjustment is called "forward points." The forward points reflect only the interest rate differential between two markets. They are not a forecast of how the spot market will trade at a date in the future.
A forward is a tailor-made contract: it can be for any amount of money and can settle on any date that's not a weekend or holiday. Transactions with maturities longer than a year are relatively unusual, but are possible. As in a spot transaction, funds are exchanged on the settlement date.
A "future" is similar to a forward in that it's for a date longer than spot, and the price has the same basis. Unlike a forward, it's traded on an exchange, and can only be executed for specified amounts and dates. With a futures contract, the buyer pays a portion of the value of the contract up front. That value is marked-to-market daily, and the buyer either pays or receives money based on the change in value. Futures are most commonly used by speculators, and the contracts are usually closed out before maturity.
What is the difference between notional value and market value?
The notional value and market value describe the amount of a security. The notional value is the total value of options, forwards, futures and foreign exchange currencies. The market value is the price of a security in the marketplace.
Notional Value.
The notional value is the total amount of a security's underlying asset at its spot price. The notional value distinguishes between the amount of money invested and the amount associated with the whole transaction. The notional value is calculated by multiplying the units in one contract by the spot price.
For example, assume an investor wants to buy one gold futures contract. The futures contract costs the buyer 100 troy ounces of gold. If gold futures are trading at $1,100, then one gold futures contract has a notional value of $110,000.
Market Value.
On the other hand, the market value is the price of a security that buyers and sellers agree on in the marketplace. The security's market value is calculated by determining the security's supply and demand. Unlike the notional value, which determines the total value of a security based on its contract specification, the market value is the price of one unit of the security.
For example, assume that the S&P 500 Index futures are trading at $2,000. The market value of one unit of the S&P 500 Index is $2,000. Conversely, the notional value of one S&P Index futures contract is $500,000 ($2,000*250) because one S&P Index futures contract leverages 250 units of the index.
FX Option Performance: An Analysis of the Value Delivered by FX Options since the Start of the Market.
Description.
Daily turnover in FX options is an estimated U. S. $ 207 billion, but many fundamental facts about this huge and liquid market are generally unknown. FX Option Performance provides the information practitioners need to be more effective in the market, with detailed, specific guidance.
This book is a unique and practical guide to option trading, with the courage to report how much these contracts have really made or lost. Breaking free from the typical focus on theories and generalities, this book gets specific – travelling back in history to show exactly how options performed in different markets and thereby helping investors and hedgers alike make more informed decisions. Not overly technical, the rigorous approach remains accessible to anyone with an interest in the area, showing investors where to look for value and helping corporations hedge their FX exposures. FX Option Performance begins with a quick and practical introduction to the FX option market, then provides specific advice toward structures, performance, rate fluctuation, and trading strategies.
Examine the historical payoffs to the most popular and liquidly traded options Learn which options are overvalued and which are undervalued Discover surprising, generally unpublished facts about emerging markets Examine systemic option trading strategies to find what works and what doesn't.
On average, do options result in profit, loss, or breaking even? How can corporations more cost-effectively hedge their exposure to emerging markets? Are cheap out-of-the-money options worth it?
Table of Contents.
About the Authors xi.
CHAPTER 1 Introduction 1.
1.1 Why Read This Book? 1.
1.3 What Is an FX Option? 3.
1.4 Market Participants 5.
1.4.1 How Hedgers Can Use This Information 6.
1.4.2 How Investors Can Use This Information 7.
1.5 History and Size of the FX Option Market 9.
1.6 The FX Option Trading Day 14.
CHAPTER 2 The FX Option Market: How Options Are Traded and What That Implies for Option Value 17.
2.1 Introduction 17.
2.2 The Basics of Option Pricing 18.
2.2.1 The Black-Scholes-Merton Model 18.
2.2.2 The Impact of Volatility 20.
2.2.3 The Impact of Rate Differentials 21.
2.3 How Options Are Traded 22.
2.3.1 Two Views of Volatility 23.
2.3.2 Static Trading 24.
2.3.3 Dynamic Trading 24.
2.4 A More Detailed Discussion of Option Trading 26.
2.4.1 The Greeks 26.
CHAPTER 3 It Is All About the Data 33.
3.1 Introduction 33.
3.2 The Goal: To Price Lots of Options! 34.
3.3 Defining a Universe of Currencies 34.
3.4.1 Pricing Model Data Requirements 38.
3.4.2 Sourcing the Data 39.
3.4.3 Calculation Frequency 40.
3.4.4 Currency of Option Notional Amount 41.
3.4.5 Spot Market Value 42.
3.5 Limitations 43.
CHAPTER 4 At-the-Money-Forward (ATMF) Options 47.
4.1 What Are ATMF Options? 47.
4.1.1 How Are ATMF Options Used and Traded? 47.
4.1.2 What Is the ‘Fair’ Price for an ATMF Option? 48.
4.2 How Might Mispricings Arise? 50.
4.2.1 Can the Forward Rate Be on Average Wrong? 51.
4.2.2 Can the Implied Volatility Be on Average Wrong? 52.
4.2.3 Simple Example with USDJPY 53.
4.3 Results for Straddles for All Currency Pairs 55.
4.3.1 Discussion of Results for Straddles 57.
4.3.2 A Breakdown of the Results by Currency Pair 62.
4.3.3 Drilling Down to Different Time Periods 62.
4.3.4 Comparison of Put and Call Options 64.
4.4 Have We Found a Trading Strategy? 75.
4.5 Summary of Results 76.
CHAPTER 5 Out-of-the-Money (OTM) Options: Do Supposedly ‘Cheap’ OTM Options Offer Good Value? 77.
5.1 Introduction 77.
5.2 Price versus Value 78.
5.3 The Implied Volatility Surface 79.
5.4 Why Do Volatility Surfaces Look Like They Do? 80.
5.4.1 Equity Indices 80.
5.4.2 Foreign Exchange Markets 83.
5.5 Parameterising the Volatility Smile 84.
5.6 Measuring Relative Value in ATMF and OTM Foreign Exchange Options 88.
5.6.1 The Analysis 89.
5.6.2 Option Premium 90.
5.6.3 Option Payoff 90.
5.6.4 Payoff-to-Premium Ratios 90.
5.6.5 Discussion 95.
5.6.6 Alternative Measures of OTM Option Worth 96.
CHAPTER 6 G10 vs EM Currency Pairs 99.
6.1 Why Consider EM and G10 Options Separately? 99.
6.2 How Would EM FX Options Be Used? 99.
6.3 Straddle Results 100.
6.3.1 Comparison of ATMF Put and Call Options 103.
6.3.2 Comparison of OTM Put and Call Options 106.
6.3.3 The Effect of Tenor 111.
6.4 Hedging with Forwards vs Hedging with Options 113.
6.5 Summary of Results 120.
CHAPTER 7 Trading Strategies 123.
7.1 Introduction 123.
7.2 History of the Carry Trade 123.
7.4 G10 Carry Trade Results 125.
7.5 EM Carry Trade Results 130.
7.6 What Is Going On? 131.
7.7 Option Trading Strategies – Buying Puts 132.
7.8 Option Trading Strategies – Selling Calls 136.
7.9 Option Trading Strategies – Trading Carry with Options 140.
7.9.1 Premium and Payoff vs MTM Calculations 144.
7.10 Summary of Results 146.
CHAPTER 8 Summary 149.
8.1 A Call to Arms 149.
8.2 Summary of Results from This Book 150.
8.3 Building up a Picture 151.
8.3.1 What Does This Mean in Practice? 155.
8.4 Final Word 156.
Author Information.
JESSICA JAMES is Head of the FX Quantitative Solutions team at Commerzbank in London. She was formerly with Citigroup and held a number of FX roles, latterly as Global Head of the Quantitative Investor Solutions Group.
JONATHAN FULLWOOD is a Director in FX Quantitative Solutions at Commerzbank in London. He has also worked in fixed income research and portfolio strategy roles.
PETER BILLINGTON is Global Head of FX Exotic Option Trading at UniCredit in London. Since 1993 he has worked in FX option trading roles for Standard Chartered Bank and BNP Paribas and been Global Head of FX Trading at Commerzbank.
Press Release.
Connect with Wiley Publicity.
Daily turnover in FX options is over U. S. $ 300 billion * , but many fundamental facts about this huge and liquid market are generally unknown. FX Option Performance offers a unique and practical guide to option trading. Written by three experts in the FX market, this essential resource has the courage to report how much these contracts have really made or lost throughout history.
The book is unique in offering both a practical guide to option trading alongside a historical look at how options performed in different markets, to help investors and hedgers alike make more informed decisions.
Not overly technical, the book is an accessible resource for anyone with an interest in this area, showing investors where to look for value and helping corporations hedge their FX exposures. FX Option Performance begins with a quick and practical introduction to the FX option market, and goes on to determine, in rigorous detail, what value different options have delivered to their owners since the market began. It includes:
An examination of the historical premiums and payoffs for all liquidly traded FX options A detailed evaluation of which options are generally overvalued and which are undervalued An analysis on emerging market FX options which reveals they have been surprisingly cheap in many cases A review of systemic option trading strategies, seeing what has worked and what hasn’t.
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