Portfolio question - re Options

[Charles Day]

On Tue, Feb 24, 2009 at 6:54 PM, David Ryder <davaweb at bigpond.net.au> wrote:

> Hi,
>
> I run a business am looking at the possibility of combining my Portfolio
> into my gnucash accounts and using just gnucash for Portfilio
> Management. I have some questions and will start with the first - a
> trader, yes, but an accountant I certainly am not!
>
> I trade daily in Options. To me this is Income and I would like to
> post under Income:Options as Stock entries - can I? They are not assets
> in my case but I don't want to confuse gnucash. All the documentation I
> have found says they should be "Assets".
>
> They would be posted to Liabilities:account-name2.
>

GnuCash doesn't have the concept of options or underlying, but you can just
use a "stock" account type and pretend that one "share" is one
"contract". It sounds like you are short options (writing options). You
 "stock" account type would be created as a child of either an asset or
liability account. Personally I would probably use an asset account with a
negative number of contracts rather than a liability account with a positive
number of contracts. I would hope that either would work, however someone
please speak up if portfolio reports require the accounts to be assets for
some reason.

When does an income account come into the picture? I would assume when
selling an option, the premium sits around as an asset until expiration or
exercise, and then you record the difference as income when you go to zero
out the number of contracts held. Or are you trying to do it some other way?

Essentially it is the same as doing a short sale of stock; there is the sale
and then, later, the cover. The difference is that the price paid to cover
will be zero if the options just expired worthless.


> Is this a problem, please?
>
> Thanks,
>
> David
>

 -Charles