Chapter 02 · Section 2.1
PHLX DM Options
Suppose Victor, our investor, decided to buy PHLX DM Option Contracts. He had not had a Deutsche Mark position before.
Note:
- PHLX is the symbol for the Philadelphia Stock Exchange.
- 1 PHLX DM option contract covers DM 62,500.
- The PHLX DM option contract has a monthly expiration cycle one can buy a DM options contract for every month of the year.
a) He is long DM 62,500.
b) He is short DM 62,500.
c) He is long 3 PHLX DM options.
d) He is short 3 PHLX DM options.
To be long an option is different than to be long the currency the option is based upon. However, both long positions have similar consequences.
"Long": you bought more than you sold. "Short": you sold more than you bought.