An option is a contract that represents a right, which gives the contract holder the right to sell the underlying asset at a specific time or at a specific price. The holder of the contract has a right, not an obligation to buy or sell.
There are many kinds of underlying options, 50ETF is just one of them, there are 300ETF or 500ETF and other commodity options or ** options.
For example, an insurance contract in life can also be understood as an option, but its trigger condition is whether an event occurs in a certain period of time in the future. Once an incident has occurred, you can exercise your rights.
Therefore, for 50 ETF options, we only need to understand that its underlying is 50 ETF, and track the Shanghai Composite Index to understand the main weighted stocks of 50 ETF options.
A few common questions and answers about options.
1.The difference between options and **
*It is a standardized contract transaction with an agreed expiration date, one hand to pay and one hand to deliver. If the money is not paid or delivered as agreed on the due date, it will constitute a "breach of contract" and the price of breach of contract will be paid.
Therefore, in a ** transaction, both parties to the transaction are obliged to perform the contract.
But options are different, after the option is opened, what you have is the right. And in order to obtain this right, a royalty needs to be paid. At maturity, the buyer is free to choose whether or not to exercise the option.
Of course, regardless of whether you choose to exercise the option or not, the premium paid is non-refundable.
2.Do options have to be held to expire?
The trading of SSE 50 ETF options is just like our usual **, which is an auction transaction. Everyone who buys an option, as long as the option does not expire, can put a sell order to close the option, which is called selling to close the position.
3.Is there only one option a day?
It's obviously not one a day, but it's the same as what everyone usually plays, from 9:30 to 11:30 in the morning and from 1:00 to 15:00 in the afternoon.
*The frequency of changes depends on the activity of the trade, and generally speaking, the liquidity of options in the at-the-money and out-of-the-money 1 tiers is the best.
In fact, interested investors will also find that the more liquid the option contract, the higher the correlation between the intraday tick chart and the tick chart of the target, the call and the target are like overlapping, and the put and the target are like mirrors.
4.Will the option be liquidated?
As an ordinary investor, there is no risk of liquidation when opening a position.
When an investor buys an option, it's like buying an insurance policy, and after I pay a premium to the insurance company, will they still collect the debt from me?Naturally, it won't.
Therefore, this feature reflects a major feature of ** options, that is, the loss is limited and there will be no liquidation.
5.What are in-the-money, at-the-money, and out-of-the-money options?
How to distinguish between in-the-money, at-the-money, and out-of-the-money options?Theoretically, we buy options in order to get a certain amount of income when they are exercised at expiration.
Therefore, I recommend that beginners understand the probability of exercising at maturity when understanding real-the-money, at-the-money, and out-of-the-money options. Whether it is a call or a put option, stand in the present and look at the future.
If the expiration exercise probability is greater than 50%, it is considered an in-the-money option, if the expiration exercise probability is less than 50%, it is considered an out-of-the-money option, and if the expiration exercise probability is exactly equal to 50%, it is considered an at-the-money option.
6.Deep out-of-the-money options** are cheap, can I buy them?
Although the ** of the deep out-of-the-money option contract is very cheap, investors are advised to still be cautious about this type of option, because it is only possible to make a profit when the underlying *** changes dramatically.
If the option is close to expiration, the underlying ** has not yet reached the breakeven point, even if the direction is correct, it may be worthless.
7.Are Deep In-the-Money Options Risky?
Investors**Deep in-the-money options need to pay a high premium and have a low utilization rate.
When the underlying asset changes in an unfavorable direction, since the absolute delta value of the deep in-the-money option tends to be close to 1, the deep in-the-money option** will tend to be close to the decline of the underlying asset**, and the investor will incur a large loss.
8.Why time is the enemy of options buyers
The option buyer has the right, but the right is not indefinite. The most disadvantageous thing for option buyers is the loss of time value, and under the same conditions, the longer the expiration time, the higher the premium.
When the expiration date is approaching and the time value accelerates the loss, investors should judge the magnitude of the change in the target and the time of the expected change in time, if it is far away, it is necessary to consider closing the position as soon as possible and stop loss.
9.Which contract should I choose to trade?
When you first participate in options trading, it is easy to be confused by the dense contracts on the client, and there are three most basic elements of choosing an option contract: direction, amplitude and time.
Look at the direction, bullish or bearish.
Bulls can buy call option contracts, and bearish can buy put option contracts, and the specific choice of which operation depends on the amplitude
For example, a bullish rise often corresponds to buying an out-of-the-money call option contract, and a small rise chooses an at-the-money or in-the-money call option contract. A big drop often corresponds to buying an out-of-the-money put option contract, and a small drop is an at-the-money or in-the-money put option contract
Third, look at the time, do swing, intraday, or trend trading, and make decisions based on your own judgment of **.