Support Query

• How do I record Exchange Traded Options in Simple Fund 360?
• How do I sell call options for clients where there isn’t an asset to ‘buy’ as such, we’re just selling the right to buy shares that we already own.

Solution

Method 1 - Call Options 

Details

Call options give the holder the right, but not obligation to buy an underlying share at a predetermined price on or before the expiry date.

Example: The SMSF pays a premium of $138.24 and receives the right to buy 200 ANZ shares.

When the Options have been purchased:

Record the creation of the Option

From the Transaction List click

Select Bank Statement

*When a premium is not charged input the number of units and a debit of 0.

Options have been sold:

If the option is sold, process a disposal.

From the Transaction List click

Select Bank Statement

Option has been exercised:

Step 1 - Record the purchase for ANZ Shares:

From the Transaction List click

Select Bank Statement

Step 2 - Transfer the Cost of the options to ANZ:

From the Transaction List click

Select Journal

When the Options are not Exercised:

When the Option is not exercised, process an Investment Disposal (zero consideration) to recognise the capital loss on the premium paid.

Method 2 - Put Options

Details

Put Options give the holder the right, but not the obligation to sell an underlying share at the exercise price on or before the expiry date.

Example: The SMSF receives the right to sell 200 ANZ shares at the exercise price. For this right, the SMSF pays a premium of $138.24 to the seller of the contract.

Create the Put Option 

To record the Put Option:

From the Transaction List click

Select Bank Statement

When the Option is exercised (assuming ANZ shares have been already purchased)

To exercise an option you will need to complete two steps

1. Increase the ANZ cost base by the premium paid
2. Record the Disposal of the ANZ Shares

Step 1 - Increase the ANZ cost base by the premium paid by recording a cost base adjustment.

From the Transaction List click

Select Journal

*Check out How to Enter an Investment Cost Base Adjustment.

Step 2 - Record the disposal of ANZ shares 

When the Option is not Exercised

When the Option is not exercised, process an Investment Disposal (zero consideration) to recognise the capital loss on the premium paid.

Method 3 - SMSFs Regularly Trading Options  

As Simple Fund 360, does not currently have the functionality to deal with the selling or writing of Call Options (Or short selling), the method 3 utilises the use of two Investment Accounts, one for cash movement and one for calculating the correct CGT.

Create two Investment account to be used for Option Trading

One which is used to allocate cash Transactions (non-Unitised)

One which will be used to calculate CGT

Writing Call and the option lapses

1. Writing a Call on Existing Shares

For this example, on the 03/07/2015 the sell position would need to be entered as follows

2. Option Lapses, Recording a Capital Gain 

A general Journal should be entered. The open position is sold for the lapsed amount and cost base of zero which will trigger a capital gain.

Purchase Call and it is exercised  

1. Original Derivative Purchase

In this example, record the Original Derivative Purchase. Amount from the bank is processed to non-unitised account and the open position is created

2. New Shares are purchased

3. Open Position is closed and applied to cost base of Shares

Writing Call and Buy shares to Close position

Example:

1. Original position

19/04/2016 - Original position is created.

2. Amount received

05/05/2016 - Amount received is processed to the Options Account which should be the same amount as the original sell position. The Options Position account has the difference applied as a Cost Base Adjustment

3. Record Capital loss

The Option Position is then sold for $0 triggering a capital loss