Sum = 10 000
Protection = 90%
Direction = Long (all operations with Call options)
Income = up to 15%
Underlying Asset = AAPL
Current price of the underlying asset = 145,86
Еxpiration date = 15.09.2023
Formation date = 11.11.2022
Return on the protective asset = 4% per annum (including commissions)
The protective asset = LendingRobot
Commission for one options contract = 5
Options turnover commission = 1%
The product consists of the Protective part and the Revenue part
The protective part is required to ensure the protection of capital at the time of expiration. The amount of the protective part is calculated in such a way as to achieve the selected protection by the time of expiration, taking into account return on the protective asset. The commission for transactions with the protective part is included in the return.
For the protective asset, 8706.14 is allocated. The product is to expire in 308 days.
The amount of the protective asset at the time of product expiration including the yield of the protective asset is determined according to the following formula:
The capital required at the time of expiration to comply with capital protection requirements = 10000 * 90% = 9000.
The amount of the protective part at the time of expiration is equal to the amount of capital required to ensure capital protection.
In such manner, 90% capital protection is ensured, regardless of what happens to the revenue part.
For the revenue part, 1 293.86 is allocated. Five options AAPL3IFC165000 are purchased at a price of 12.45, this is 6225. Five options AAPL3IFC170000 are sold at a price 10.35, this is 5175. We pay 6225 and obtain 5175, the cost of purchasing the option pattern = 6225 – 5175 = 1050.
The commission for 10 contracts is 5*10 = 50. The turnover commission = (6225 + 5175) *0.01 = 114.
Balance = 1 293.86 – 1050 – 50 – 114 = 79.86.
Scenarios at the time of product expiration
The price of the underlying asset reached the target level at expiration time
If at the expiration time (15.09.2023) the share price is greater than or equal to 170 (the strike price of the option being sold), then the product will yield a total return. In this case, we buy five lots of shares at a price of 165 under the purchased option and sell five lots of shares at a price of 170 under the sold option.
Total income = (170 – 165) * 500 = 2500
Total capital at the end of product expiration = 9000 + 2500 + 79.86 = 11 579.86
Net income = 11 579.86 – 10000 = 1 579.86
Net income as a percentage = 1 579.86 / 10000 = 15.8%
In this way, total return is ensured.
The price of the underlying asset did not reach the strike level of the purchased option
If at the expiration time (15.09.2023) the share price is less than 165 (the strike price of the purchased option), then both options will be out of the money and will be written off.
The protective part and balance will remain on the product = 9000 + 79.86 = 9 079.86
Net income on the product = 9 079.86 – 10000 = -920.14
Net income on the product as a percentage = -920.14 / 10000 = -9.2%
As a result of the protection, we may lose no more than 10%. The losses amounted to 9.2%, which is less than the possible losses.
Capital protection is ensured in this manner.
The price of the underlying asset is between strike prices at the expiration time
If at the expiration time (15.09.2023) the share price is between the strike prices, i.e. more than 165 and less than 170, partial return will be achieved on the product. Let us presume that the share price at the time of expiration is 168. In this case, we buy five lots of shares at a price of 165 under the purchased option and sell these five lots at a market price of 168. The sold option is out of the money and will simply be written off.
Total income = (168 – 165) * 500 = 1500
Total capital at the time of product expiration = 9000 + 79.86 + 1500 = 10 579.86
Net income = 10 579,86 – 10000 = 579.86
Net income as a percentage = 579.86 / 10000 = 5.8%
In this way, partial return is achieved.