Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p77
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in the basic method.

A3.26.2  Method

(1) The position risk amount for a purchased Option is the lesser of:

(a)        the mark-to-market value of the underlying Commodity position multiplied by the standard method Commodity Position Risk Factor specified in Table A5.1.8 in Annexure 5 to Schedule 1A; and

(b)       the mark-to-market value of the Option,
where:
 1.         subject to paragraph (d), the notional value of the physical position underlying the Option is the price the Market Participant would have to pay for the Commodity underlying the Option if it were to take a long position in that instrument at current market rates; and
(d)       for an Option over a Futures contract over a physical Commodity, the notional position should be in the physical Commodity.

(2) The position risk amount for a written Option is the mark-to-market value of the underlying Commodity position multiplied by the standard method Commodity Position Risk Factor specified in Table A5.1.8 in Annexure 5 to Schedule 1A reduced by:

(a)        any excess of the exercise value over the current market value of the underlying position in the case of a call Option, but limited to nil if it would otherwise be negative; or

(b)       any excess of the current market value of the underlying position over the exercise value in the case of a put Option, but limited to nil if it would otherwise be negative.

Part A3.27 Calculation of Commodity Equivalent positions—Commodity position risk

A3.27.1  Options
The Commodity Equivalent for an Option is:
(a)        for purchased call Options and written put Options, a long position in the notional Commodity positions underlying the contract or option multiplied by the spot price of the underlying commodities position; and
(b)       for purchased put Options and written call Options, a short position in the notional Commodity positions underlying the contract or option multiplied by the spot price of the underlying commodities position.

        A3.27.2 Futures
The Commodity Equivalent for a Commodity Future is the notional amount in terms of the standard unit of measurement underlying the future contract multiplied by the spot price of the Commodity.

        A3.27.3 Forward contracts
The Commodity Equivalent for a Commodity forward contract including a future exchange associated with a Commodity Swap is the notional amount in terms of the standard unit of measurement underlying the forward contract multiplied by the spot price of the Commodity.

A3.27.4 Commodity Swaps
(1) The Commodity Equivalent for a Swap where one leg is a fixed price and the other leg is the current market price is a series of positions equal to the notional amount of the contract, with one position corresponding to each payment on the Swap. The positions are long positions if the Market Participant is paying