Portfolio question - re Options

[Donald Allen]

On Tue, Feb 24, 2009 at 11:32 PM, Charles Day <cedayiv at gmail.com> wrote:
> 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".

If you want to get online price quotes, it would be better to have the
number of "shares" of the position in Gnucash = the number of
contracts * the multiplier (usually 100). So if you are long one IBM
March 2009 90 call, you would enter that as +100 shares. The reason
I'm saying this is that option prices are quoted per-share of the
underlying, not per-contract (so if that IBM call was quoted as having
an ask of, say, $4.25, you'd pay $425 per contract).

/Don

 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
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