One of the most important concepts of options is the right to buy and sell an underlying asset in the future through an option contract.
Many people don't understand what the trading mode of options is, because the ** of options is very different from the traditional **, the following is the ** chart of 50ETF options, which is like a T-shaped **.
The call option (also known as call option) and put option (also known as put option) in the chart are the most basic and important concepts in options.
Many of the ** in the figure are options contracts**, and the reason why there are so many ** is to stabilize the value of options, investors can judge that buying contracts of different values brings different increases in income.
Option sauce collated and released
Call and put options are divided into four trading directions, the call is divided into call and sell call, and the put is divided into put and sell put.
**One call option
It is believed that the 50 index **will** (bullish market**).
The maximum risk is limited to the option premium paid.
There is no upper limit to the maximum gain.
Sell a call non-call option (the seller and the buyer are counterparties, so the buyer is bullish and the seller is not bullish).
It is believed that the 50 index will be (bearish market).
The maximum payout is limited to the option premium received.
The potential risk may be unlimited (when the stock price is **).
It can be combined with other positions to effectively control risk.
Let's interpret the put option, the put option is also known as the put option, which is divided into **put and sell put.
One put option
Believe that the 50 index will ** (bearish market).
The maximum risk is limited to the option premium paid.
The maximum payoff is the strike price minus the premium paid.
Sell a put option (the seller and the buyer are counterparties, so the buyer is bearish and the seller is not bearish).
It is believed that the 50 index will be (bullish market).
The maximum risk is the strike price minus the option premium received.
The maximum payout is limited to the option premium received.
It can be combined with other positions to effectively control risk.
Option sauce collated and released
Use real-life examples to explain what a call option is
To better explain the concept of call options, let's take the example of buying a house.
Let's say Xiao Ming plans to buy a house, and the current house price is 2 million. He wants to wait and see for a while, but is worried that the house price** will lead to a lack of funds to buy a house.
Therefore, Xiao Ming signed a contract with the real estate agent, stipulating that after one year, no matter how the house price changes, Xiao Ming has the right to buy the house for 2 million. However, in order to secure this right, Xiao Ming needs to pay a contract fee (royalty) of 20,000 yuan.
The three scenarios that could happen in the future are as follows:
1.Room Rates**:
After a year, if the house price is **, Xiao Ming can still use 2 million to buy this house, but the contract fee of 20,000 yuan he paid will not be refunded. At this point, the option owned by Tom is in-the-money because the strike of the call option is lower than the actual option at that time.
2.House prices plummeted:
After one year, if the house price is large**, Xiao Ming can choose to abandon the contract without paying a contract fee of 20,000 yuan. Because he bought a house at the market price at that time, even if he lost the contract fee, Xiao Ming still made a profit. In this case, the option owned by Tom is out-of-the-money because the call option is exercising **higher than it actually was at the time**.
3.Rates unchanged:
After one year, if there is no change in the house price, Xiao Ming can choose whether to exercise the contract or give it up, and whether Xiao Ming chooses to exercise or give up, he will lose 20,000 yuan in contract fees. At this point, the option owned by Tom is at-the-money, because the strike of the call option is equal to the actual at that time.
For Xiao Ming, his biggest loss was a contract fee of 20,000 yuan. By paying this fee, he locks in the risk of house price fluctuations and gains a certain sense of security in an uncertain market.
Xiao Ming's behavior is called buying a call option, and the biggest loss is the contract fee, if the house price is lower than 2 million next year, Xiao Ming will not fulfill the contract, and it is more cost-effective to choose to buy a house at the market price at this time.
Wait until next year's house price exceeds 2.02 million yuan, Xiao Ming will make money, because he used a fixed contract fee of 20,000 yuan.
Calculate the break-even point of the call option, which is the point at which the gain and loss of buying the call option are offset
Formula: Break-even point for buying a call option = exercise** + premium
Why are options leveraged?
Options are considered leveraged because investors only have to pay a premium (option fee) when buying an option, rather than having to pay the full price of the underlying asset. This allows investors to control larger positions with a smaller capital investment, magnifying the potential gains and risks.
If Xiao Ming spends 20,000 yuan to buy a call option, the house price will rise to 2.3 million yuan next year, and Xiao Ming will earn 280,000 yuan (2.3 million - 2 million - 20,000 yuan). It is equivalent to earning 280,000 yuan with 20,000 yuan, and the income is 14 times.
The definition of buying a call option (also called a call option) is: when the expected target *** investor can choose **call option, use less capital to obtain the leveraged income brought by the target ***.
Why would real estate developers be willing to sign this contract?
For real estate developers, it is not very likely that the price of the house will increase next year, so it is better to sign a contract to earn a contract fee (royalty).
The act of a real estate developer is called selling a call option. Regardless of the rise or fall of housing prices, the biggest benefit for real estate developers is the premium, which is a contract fee of 20,000 yuan.
What is the best situation for real estate developers?
Next year, house prices will not **, or just fall slightly. No, Xiao Ming will not perform the contract, which is equivalent to the real estate developer earning 20,000 yuan in contract feesIf it falls slightly, Xiao Ming will not perform the contract, and the loss of the house held by the real estate developer is not large. Only when the house price exceeds 2.02 million yuan next year, the real estate developer will lose money.
So we can get the breakeven point for selling the call option as follows.
Formula: Break-even point for selling a call option = exercise** + premium
So what is a put option?
Let's say Xiao Zhang owns a house with a current market value of 2 million, but he is worried that the price may be large in the future. Therefore, Xiao Zhang signed a contract with the real estate agent, stipulating that after one year, Xiao Zhang has the right to sell the house to the real estate agent for 2 million **.
In order to obtain this right, Xiao Zhang needs to pay a royalty of 20,000 yuan. This contract gives Zhang the right to sell the house in the future for a fixed **, and his maximum loss is only the premium paid. Only when the house price falls below 1.98 million yuan next year, Xiao Zhang will make a profit, because his expenses are a fixed premium of 20,000 yuan.
*The break-even point for a put option is calculated as follows:
Formula: **Break-even point of put option = exercise** premium
A put option (put option) is defined as a put option that can be selected when the investor expects the underlying option to fall.
*A put option is an effective shorting tool that insures a portfolio. Especially in certain trading strategies, such as grid trading, investors may be concerned about the market's large margins**. By hedging by buying put options, investors can effectively protect themselves from unexpected risks.
How to understand this behavior of real estate developers?
A real estate agent behaves similarly to selling a put option, and the biggest gain comes from the premium collected. In this case, the real estate agent entered into a contract with Xiao Zhang, allowing Xiao Zhang to sell the house to the real estate agent for a specific ** at a certain date in the future. Zhang needs to pay a premium of 20,000 yuan to obtain this right.
The break-even point for selling a put option is calculated as:
Formula: Break-even point for selling a put option = exercise** premium
If the house price is not ** next year, Xiao Zhang will not exercise his rights, and the real estate agent can keep the 20,000 yuan royalty collected, even if the property is not actually purchased. Only when the house price falls below 1.98 million yuan will the real estate agent suffer a loss.
The definition of selling a put option is that when an investor expects that they will not do so in the future, they can choose to sell the put option and receive a premium proceed from it.
Most novice investors usually tend to buy call or put options to make a big deal out of it. In contrast, experienced or large capital investors are more inclined to sell call or put options to increase their earnings by receiving a premium. Options