Suppose you have a house option that states that you have the right to buy a house at a predetermined date in the future, but you don't have to, it's like retaining an option to buy a house in the future.
Now let's say you hold this option, and one day in the future, the market for the house is up, and your option is still pre-set. At this point, you can choose to exercise your option to buy the house at a low price, which you can then sell or use for yourself.
However, if the market is lower than what you specified in your option, you can choose not to exercise the option and simply forgo buying the house, as it is more cost-effective to buy the house at a lower price in the market.
Release**: Option Sauce.
Options can also be sold optionally, in which case you will be given the right to sell the asset for a specific amount in the future.
The underlying assets of domestic options can be **, index or **, for example, the earliest listed 50 ETF options are based on ChinaAMC SSE 50 ETF**.
The trading form of 50ETF options is divided into subscription call and put put, call and put can be divided into four trading directions, if you do the buyer bullish SSE 50 on the **subscription, put on the 50 put, and do the seller is not bullish and small down on the sell subscription, not down or small Zhang on the sell put, and the buyer is to form an opposing relationship, they have different expectations and strategies.
In-depth understanding of call and put options
Call Option:
A call option refers to an option contract in which the right holder of the option has the right to exercise the underlying contract at a certain time in the future. For example, Mr. Wang thinks that Company X **will**, but is worried that the stock price ** will cause losses. So, he bought a call option contract and paid a $1 premium, which stipulated that he would pay $10 shares for ***x company ** after 3 months. On the expiration date:
If the stock price is higher than $10, Mr. Wang will exercise the right to buy 1 share X at $10, but will not refund the $1 premium.
If the stock price is less than $10, Mr. Wang will not exercise the right of ** because the stock price is cheaper in the market, but the premium of $1 will still not be refunded.
The buyer of a call option (long) has the right to specify the amount of the underlying (or ETF) to the seller of the option contract at the expiration date by agreement, depending on the contents of the contract. The buyer has the right to buy, but does not have to execute.
Put Option:
A put option is an option contract in which the right holder of the option has the right to sell the underlying contract at a certain time in the future with exercise**. For example, Mr. Wang holds the ** of Company Y and is worried that the stock price will cause a loss. Therefore, he purchased a put option contract and paid a $1 premium, which stipulated that Company Y would be sold for $20 after 3 months. On the expiration date:
If the stock price of Company Y is lower than $20, Mr. Wang will exercise the right to sell 1 share of Y** at $20, but will not refund the $1 premium.
If the stock price of Company Y is higher than $20, Mr. Wang does not exercise the right to sell, because the stock price is more expensive in the market and it is more advantageous to sell, but he still does not return the $1 premium.
The buyer of a put option (long) has the right to sell a specified amount of the underlying (or ETF) to the seller of the option contract at an agreed date on the expiration date based on the contents of the contract. The buyer has the right to sell, but does not have to execute.
In call and put option trading, the buyer aims to make a high yield and bear limited losses, while the seller expects to receive premium income and assume the corresponding ** or sell obligation.
Many investors are entangled in the identity of the buyer and the seller, the essence of options trading is the exchange of rights, and the ** of options is also known as the premium, that is, the ** of rights. Options trading has some unique features compared to asset trading such as **.
Insurance, for example, is a typical option product with a term in which the policyholder actually buys a right to claim compensation from the insurance company in the event of an accident.
From a common sense perspective, let's discuss the factors that affect insurance**:
1.Time:
The longer the coverage provided by the insurance, the higher the coverage rate. For example, a 3-year plan is more expensive than a 1-year plan.
2.Probability of risk occurrence:
The more likely the event to occur, the higher the uncertainty and the higher the corresponding insurance**. For example, when purchasing **insurance, **frequent areas** insurance is higher.
These two points correspond to the time value and implied volatility of options in options trading, respectively, and are an important part of influencing options.
When trading options, investors need to consider their identity:
The buyer of the option is equivalent to the policyholder who wants the value of the option to be held**. The more the market moves in the direction expected by buyers, the more profitable it is. However, as the expiration date approaches, the time value of the option will decay rapidly, and the trading strategy needs to be adjusted in time.
The seller of the option is equivalent to the insurance company, and can receive a "premium" at the beginning, and if the risk event does not occur, the premium can be stably pocketed. But if the market starts to get out of control, there is also a good chance that you will face huge losses.
The basic function of an option
1.Profit function: Options trading can be made by ** or selling option contracts. If you have a clear judgment about the market trend, you can sell the option contract that is the opposite of the basic pattern and get excess returns. For example, if you expect white sugar***, you can sell a white sugar put option.
2.Insurance function: The pricing of options is similar to the pricing of insurance. For ** investors, options can provide insurance functions. If you anticipate that the market may ** in the future, but are unwilling to change positions, you can buy a put option as a precautionary measure. In this way, even if the market is **, it is still possible to maintain a long position and avoid risk at the same time.
3.Speculative features: Options trading can also be used for speculative purposes. Many options trades are closed before the strike date, so the bid-ask spread is also a profitable way to trade options.
Generally, if the floating profit and loss of option exercise displayed in the reference software is positive, after deducting the handling fee and premium paid for exercising, it is greater than the profit of option closing, and the exercise will be exercised substantially. However, option exercise does not always happen, it may only be to convert the option position into a ** position for hedging, arbitrage, etc.
The flexibility and diversity of options make them an important tool for investors when managing risk, capturing excess returns, or engaging in speculative activities. Options