The process of options trading consists of four steps:
Step 1: Anticipate the stage, clarify your view on the market and decide whether to be bullish, bearish, or stay on the sidelines.
Step 2: Strategy selection, based on expectations, select the corresponding strategy in the options market. For example, if you are bullish on a bullish rise, you can choose a call option, and if you are bullish on a big fall, you can choose a put option.
Step 3: Open a position, open a position according to the selected strategy, i.e. ** or sell an option contract.
Step 4: Closing stage, for the open position of **, you can choose to hold it until expiration, or you can close the position in advance by selling to close the position.
Specific to the expectation of opening a position, it is divided into two situations: buy subscription and buy put. The concise mantra is: "Buy and subscribe when you are bullish, and buy put when you are bullish." ”
The expectation of selling and opening a position is divided into two situations: selling call and selling put. The key is to understand that the views of the buyers and sellers of options are opposite. Because the buyer of the call option is bullish, the seller is not bullish;The buyer of the put option is bearish, and the seller is not bearish. The simple mantra is: "Don't sell for bullish, don't sell for bearish." ”
Option sauce collated and released.
Investors need to clearly link market views to the corresponding options strategy in order to trade more targetedly.
Investors need to be prepared for the following before entering the options market:
1] Proficient in the characteristics of options: Options are a non-linear financial derivative, and the relationship between its value and the underlying asset** is not a simple ratio. Investors should be familiar with the risk-return structure of options and understand the four basic positions of options. In addition to intrinsic value, options also include time value, which is affected by multiple factors such as remaining maturity, volatility, and out- and out-of-the-money degrees. An understanding of the value of time is essential for options investing.
2] Understand the leverage characteristics of options: Options are attractive to investors who participate in leveraged trading. The leverage for call and put options varies depending on the strike price and expiration date, with out-of-the-money options typically having higher leverage than in-the-money options and near-term options being more leveraged than forward options. Investors should be flexible according to their own needs and risk appetite. The leverage of an option changes with the change of the expiration date and the underlying asset, and investors need to learn to calculate the actual leverage of the option and master its change rules.
3] Understand your own risk tolerance: On the premise of having a full understanding of options, investors need to evaluate their own risk tolerance and determine whether they are suitable to participate in options investment. Options trading involves high leverage and market volatility, and investors should ensure that their funds and risk management capabilities match those of options trading.
4] Clarify the purpose of investment and choose the appropriate strategy: Investors must be clear about the purpose of investing in options, whether it is easy direction, volatility trading or arbitrageDifferent market judgments and investment objectives correspond to different strategies and options selection criteria. Investors should choose an appropriate options strategy based on market conditions and personal goals.
Through the above understanding and preparation, investors can participate in the options market in a more targeted manner, reduce risks and improve investment results. Options