Portfolio question - re Options

[David Ryder]

On Wed, 2009-02-25 at 09:17 -0500, Donald Allen wrote:
> 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,
I don't -I watch the market in real time because I work in it.

>  it would be better to have the
> number of "shares" of the position in Gnucash = the number of
> contracts * the multiplier (usually 100).
The shares per contract needs to be entered manually. In Australia most
are 1000, a few at 500, others for some complicated formula only the ASX
knows, may fluctuate until they can return to 1000.

>  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).

This is true (if 100 per contract). It would be nice if gnucash was set
up to handle these transactions via a pop up box per my response to
Charles.

Thanks for your reply (and Charles and Andrew whom I forgot to thank).

> 
> /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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