Want to make a big splash in the options market, but don't know how to choose the right contract? If you want to make a profit in the options market, you must first learn to choose the right options contract! How does that work? Come here and teach you how to identify in a minute! Options contractsThe above material ** in: Caishun Options
1. What are the types of options contracts? Options are a type of financial derivative"It gives the holder the right to purchase or a certain underlying asset at an agreed point in the future. There are many types of option contracts, each of which has its own characteristics, for example, option contracts can be divided into three types: in-the-money options, at-the-money options and out-of-the-money options according to the relationship between the strike price and the underlying asset**.
In-the-money options can be simply understood as options contracts that are immediately exercised to make a profit, and at-the-money options are when investors exercise the option on the expiration date to obtain returns, because there is a high probability that the intrinsic value of the option is zero in this case. In the case of out-of-the-money options, investors can only get income when the underlying asset of the option exceeds the exercise, and secondly, there are the following types of option contracts:
1. According to the direction of the option buyer: call option, put option
A call option means that the option buyer has the right to buy a certain amount of the underlying asset from the seller at an agreed time and the buyer has the right to choose, generally speaking, the investor who holds the call option hopes that the underlying asset will be in the future, so as to buy the asset at a lower price than the market on the expiration date.
Put option means that the option buyer has the right to sell a certain amount of the underlying asset to the option seller at an agreed time, and the buyer has the option to sell, and the investor holding the put option hopes that the underlying asset will be sold in the future, so as to sell the asset at a higher price than the market on the expiration date.
2. According to the time when the option buyer can exercise: European-style options and American-style options
A European-style option is a contract where the holder can only exercise their right to buy or sell the underlying asset on the expiration date. An American-style option is a contract in which the holder can exercise his or her right to buy or sell the underlying asset at any point in time before the expiration date. American-style options have greater flexibility and value than European-style options, and are also more favored by investors in actual trading. However, American-style options will typically be higher than European-style options**.
2. How to choose the right options contract to trade?
When choosing an option contract, investors need to have a comprehensive understanding and analysis of the market in order to better understand and fluctuate the underlying asset. Secondly, according to the direction of the target and the speed of the rise and fall, why? The direction and speed of the underlying movement are important factors in the selection of option contracts, and it is necessary to choose whether to call or put according to the direction of the target.
Secondly, you can also choose according to the expiration time, taking 50ETF options as an example, if the current fluctuation of 50ETF options is relatively stable and the volatility is not large, you can appropriately choose the current month option contract, generally speaking, the current month contract has a large position and good liquidity, and then try to choose the at-the-money and real-value contracts, which also considers the loss of its liquidity and time value, of course, this is your right party.
Finally, the above views are for reference only, not as a basis for trading, and profits and losses are at your own risk. The market is risky, and investors need to be cautious.