An option is a financial contract, a product of time + rights. It gives the buyer the right to buy or sell an asset (e.g., property, etc.) at an agreed date or any time before a specific date in the future. An options contract consists of two main parties: the buyer and the seller.
1.Royalty Payment: At the beginning of an options transaction, the buyer pays a certain premium to the seller for the right to buy or sell a particular asset.
2.Call Option (Call Option): The buyer obtains the right to purchase an asset at a future date in order to execute**. The buyer of the call option expects that the asset will be.
3.Put (put): The buyer gets the right to sell the asset at a future date with execution**. The buyer of the put option expects the asset to **will**.
Example:
Let's say you own a property with a market value of $2 million, and you expect it to be **in the next month**. But you don't want to risk investing a lot of money and at the same time you don't want to miss out on potential gains. In this case, you can enter into an option contract with someone.
You pay a certain amount of premium to the other party, and agree that after one month, regardless of the rise or fall of the house price, you have the right to buy the property for 2 million **. In this contract, 2 million is called execution**, and the royalty paid is the contract**. The expiration date of the option is one month after the contract.
This option contract gives you the flexibility to respond to market fluctuations, not having to buy the property in full, but still enjoying the benefits of a potential price increase. If the rate is ** on the due date, you can make a profit by executing the **purchase according to the contract;If the rate**, you can also choose not to enforce the right, and the loss is only the premium paid.
Option sauce collated and released.
Compared to ** and **, there are four basic trading strategies for options
**—Can only be long
In the ** market, investors can only make profits through ***.
When in the market, it is possible to buy and make a profit when the stock price is open.
In the market**, investors can only adopt a wait-and-see strategy to reduce losses.
**—Long and short two-way trading mechanism
*The market has a long-short two-way trading mechanism.
When the market is ***, you can go long ** to make a profit.
When the market is ***, you can short ** to make a profit.
If you judge correctly, you will have the opportunity to make a profit regardless of whether the market is ** or **.
Options – four trading directions
1.*Call option (call): Expect a big rise and make a profit by buying a call option.
2.*Put (put): Expect a sharp drop and make a profit by buying a put option.
3.Sell Call Option (Bearish Down): Expect a small ** and receive a premium by selling the call option.
4.Sell put option (bullish up): Expect a small **, and get a premium by selling the put option.
With options, investors can profit from the stock price**, a small fall, no rise or fall.
The profit methods of options mainly include expiration exercise and transfer of option contracts
1. Exercise at maturity (exercise profit):
1.Market**:
When the option contract expires, if the house price rises from $2 million to $2.2 million, you have the right to buy the property with a market value of $2.2 million for $2 million**.
Your net profit is 200,000 yuan (the difference between the house price**), and after deducting the 5,000 yuan premium paid before, the actual net profit is 1950,000 yuan.
2.Market**:
If the price of the contract expires and the price reaches $1.8 million, you can choose to forfeit the option and only lose the $5,000 premium previously paid.
2. Transfer of option contract (premium profit):
1.Market**:
During the life of the contract, if the price of the option increases from $2 million to $2.1 million, the value of the option contract appreciates, and the premium may increase to $20,000 or more.
Before the option contract expires, you can choose to close the position early and transfer the appreciated option contract at a higher than cost**. For example, if you sell it for 20,000 yuan, the net profit is as high as 300%.
2.Market**:
If the price of the option contract is over the life of the option contract** to $1.9 million, the option contract may depreciate.
If you are worried about further loss of premium, you can stop your losses in time, close your position early, and transfer the option contract to other investors who are optimistic about the market outlook.
Both of these methods provide investors with different ways to make profits, and investors can flexibly use these strategies to obtain profits based on market trends and personal judgment.