Regarding options, there is such a joke: at the beginning of buying **, only *** will lose money;Then I learned to fry **, and as a result, I can lose money when ** and **;Later, I started to play options, and I can lose money when it doesn't go up or down. It is true that since the ** of the option is related to the volatility of the underlying asset, the expiration time of the option, etc., even if the stock price ** does not change, the option ** may have changed greatly.
The pricing method of options is indeed more complex, and the impact of different factors on options** can be expressed in the following Greek letters: changes in the underlying asset**delta), the volatility of the underlying asset (vega), the impact of the change in the underlying asset on delta (gamma), option expiration time (theta)；Interest Rate Change (rho
In addition, options are a highly leveraged variety, for example, if the SSE 50 ETF options fluctuate by more than 2%, some out-of-the-money options** may rise or fall by more than 20%.
This makes the average investor shy away from options. However, private equity managers can use options as a variety to carry out arbitrage trades and create a stable return curve with very low volatility. For example, the benefits of this product of the option arbitrage manager Taoli are as follows:
*: ITAMP** Investment Research Platform (IFA.).tanpuyun.com)
Since its inception in May 2021, the product has accumulated a revenue of 815%, the maximum drawdown is only 294%, compared to the CSI 300 index down -36% over the same period.
If the past two years this product only reflects the characteristics of stability, the income is not too high, it can be seen from the curve that the recent income of the product has obviously improved, the yield of the product since the beginning of this year is 734%, especially in October this year, there was a single month of 337% explosive gains.
One person cheers for the graduate school entrance examination Has the long-dormant option arbitrage strategy ushered in a new opportunity?Xiao Hui, the founder of Taoli Assets, recently came to Tanpu Academy to share his recent observations on the options market, and believes that the allocation of option arbitrage strategies has come to the century.
Xiao Hui's observations on the recent market are as follows:
At present, the market is extremely sluggish, and the dividend yield of the asset has reached a position that is extremely high relative to the historical range。**Assets are so attractive to bond assets that the spread has reached a position of 2 standard deviations from the average, which could lead to upward changes in the market in the future.
.Whether it is CSI 500, CSI 1000 or SSE 50, the current volatility is also in a relatively low range。Volatility has the characteristic of mean reversion, and the volatility of the index may also become larger in the future.
The stock indexes of the small and mid-cap indices represented by the CSI 500 and CSI 1000 have seen a significant discountAmong them, the contract discount rate of CSI 1000 in June next year is nearly 4%, and the annualized discount rate is close to 8%.
All of these phenomena will have an impact on the options market.
First of all, whether it is an upward trend in stock indices or an upward movement in volatility, it will bring opportunities for options trading. For example, there is a strategy in option arbitrage that is a short volatility strategy that sells both call and put options, and if the volatility has been lying at a low level, such a strategy is useless.
The upward movement of volatility will also be accompanied by the upward movement of volatility itself (second-order guide).Options are used to trade volatility, just as t0 and index increase hope that the trading partner *** volatility is large, options also want volatility to become larger.
Taoli made good gains in October this year, essentially due to the upward trend in index volatility in October.
Second, the deep discount of the index makes the CSI 1000 and CSI 500 calls particularly cheap, while the put options are relatively expensive. The principle is as follows: through the **stock index**, at the same time, the synthetic ** short formed by selling bull + **bearish can achieve risk-free arbitrage of the basis. There are more people selling calls, and call options are relatively cheaper. However, if the spread between call and put options is too large, it provides an opportunity for cross-variety arbitrage.
In addition,Option arbitrage strategies are inherently less correlated with other strategies。Because options trade volatility, the process of volatility from low to high and from high to low contains trading opportunities. For the market-neutral strategy, the bulls value the cross-sectional volatility of the market, and the volatility changes that options value are not in the same dimension, so there is no correlation between the two. The relationship between options and CTA is similar, for example, when the volatility of the whole market falls, the trading opportunities of CTA strategies decrease, but options still have opportunities.
At the current point in time, since the discount rate of the stock index itself is the hedging cost of the neutral strategy, it may be difficult for the market-neutral strategy to make returns in the case of a deep discount.
Going back to the joke at the beginning of this article, with the blessing of excellent managers, we can completely interpret it the other way around, that is, if the underlying asset does not have much trend change, as long as the volatility changes, we can still make money from second-order changes in the market through option arbitrage. Historically, we have learned that volatility is more reverting to the mean than the market itself.