Reference to one dollar (“small option”)

### Feasibility of buying a shekel-dollar option – During regular trading on the stock exchange, we will examine the feasibility of buying or writing a shekel-dollar option by referring to one dollar of the underlying asset (the underlying asset is $10,000). – As if we had broken down the real option into 10,000 “small options” in each of which the underlying asset is $1. – Each “small CALL option” allows you to buy $1. – Each “small PUT option” allows you to sell $1. – The data regarding each “small option” is derived from the data of the real option. – Each data in the small option is 1/10,000 of the real option. #### Examples **Example 1: Testing the feasibility of buying a C 400 July “call $” option, premium 1,141 NIS** – For each dollar (small option), the data on 10.7.00 are:
– Market price: 4.1060 NIS – the representative dollar rate on that day.
– Exercise price: 4,000 NIS – the dollar rate stated in the option name.
– Premium per $1: 11.41 aga.
– The premium is obtained by dividing the real premium by 10,000: 1,141 NIS / 10,000.
– To calculate the premium, you don’t need a calculator. Simply place a dot to the left of the last two digits in the premium, and read the amount obtained in Agora.
– Thus: a premium of 1,141 NIS becomes 11.41 AG.
– And a premium of 60 NIS becomes 0.60 AG (less than a penny). #### Scenarios for date B **Scenario 1 – The dollar exchange rate will be 4.05 NIS** – We will earn for each “small option” ($1): 5 AG (= 4.05 NIS – 4.00 NIS)
– We will lose on the deal: 6.41 AG (= 11.41 AG – 5 AG)
– To get the profit or loss from the real option, multiply the result by 10,000.
– In this scenario, we will receive a profit of 500 NIS for the option and a loss of 641 NIS for the transaction. **Scenario 2 – The dollar exchange rate will be 4.20 NIS** – We will earn for each small option: 20 AG (= 4.20 NIS – 4.00 NIS)
– We will earn for the transaction: 8.59 AG (= 20 AG – 11.41 AG)