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Calculation of turnover in option trading
how to calculate turnover in option trading in case of loss
Replies (1)
- Determine the total premium received: Add up the total premium received from selling options,
- Determine the total premium paid: Add up the total premium paid for buying options.
- Calculate the net premium: Subtract the total premium paid from the total premium received.
- Add the net premium to the notional value of the options traded: Multiply the number of contracts by the strike price and add the net premium.
- Consider the loss: If the net result is a loss, use the absolute value of the loss as the turnover.
- Formula: Turnover = (Total premium received -total premium paid)+ (Notional value of options traded)
- Example:
- Total premium received: Rs.1,00,000
- Total premium paid : Rs.1,20,000
- Notional value of options traded: Rs.5,00,000(10 contracts x Rs.50,000 strike price)
- Net Premium = Rs.20,000(Rs.1,00,000-Rs.1,20,000)
- Turnover: Rs.5,20,000 (Rs.20,000) + Rs.5,00,000
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