Net Option Value
The difference between long and short option positions valued at the last closing price, added to the clearing member's liquid net worth.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Base Minimum CapitalThe deposit every trading member must keep with the exchange purely to meet contingencies — it earns the member no trading exposure at all, and its size depends on what kind of trading the member does.
- Central counterpartyThe clearing corporation that interposes itself in every exchange trade, becoming buyer to every seller and seller to every buyer, so neither side carries the other's credit risk.
- ClearingThe daily accounting step that reconciles what every party owes and is owed on its open and closed positions, and turns a day of trades into one net obligation per member.
- Clearing corporationThe entity that steps between every buyer and seller in the derivatives segment by novation, becoming the counterparty to both sides and guaranteeing that the trade settles.
- Conversion factorThe multiplier that scales a futures settlement price into a fair invoice price for each bond in the deliverable basket, by valuing that bond at the notional 7% yield.
- Daily Settlement PriceThe price at which every open futures position is marked and reset at the end of each day — the last 30 minutes' volume weighted average price of that contract, computed separately for each expiry.
Where this is taught
- Series VIII · Chapter 7: Clearing, Settlement and Risk Managementintroduced here
- Series VII · Chapter 4: Risk Managementintroduced here
- Series IV · Chapter 7: Clearing, Settlement and Risk Management of IRDintroduced here
- Series I · Chapter 7: Clearing, Settlement and Risk Management in ETCDintroduced here
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