What are the rights and obligations of options? When it comes to the rights and obligations of options, I believe that friends who have been in contact with options are no strangers. But the roles corresponding to different nouns are also different, so how to understand the right warehouse and the obligation warehouse? Options
Question 1: What are the rights and obligations of options? The above material ** in: Caishun OptionsIn options trading, participants can be divided into two roles: option obligation position and option right position, and the two bear different responsibilities and rights, let's first take a look at what these two are, option right position refers to the party holding option rights, also called option buyer, and option seller because it must perform obligations to the buyer, so it is also called obligation position, whether it is a right position or an obligation position is within the scope of options trading positions.
Note: For veterans of investment, they only need to know how to buy and sell them, but novices still need to know their attributes and their respective characteristics before trading.
Question 2: What are the characteristics of the right position and the obligation position of an option?
The advantage of being an option right party is that the maximum loss is limited to the premium, while the obligor may be liquidated in the transaction. However, the risk of the right party is relatively large, if the option contract is not executed, the right party will lose all the premium, but the right party can build a strategic combination with other assets in hand, hedge the market ** risk, or allocate aggressive bullish positions when the market is optimistic.
The risk of being an option obligor is relatively small, and if the option contract is not executed, the obligor can receive the premium. If you do an obligatory position, there is another one, that is, if the option premium rises, they may need to make a margin call, otherwise they may need to close the position with a stop loss to avoid greater losses, which is a disadvantage of the obligatory position.
Question 3: Which option should be the right position and the obligation position?
So which of the two is better? In fact, there is no absolute good or bad, according to the investor's own situation, see whether it is suitable or whether it likes it or not, at the same time, investors should also pay attention to risk control, to avoid unnecessary losses caused by not understanding or misunderstanding the option contract.
According to the relevant trading rules, for investors who hold rights positions, the time value of the option contract will decay faster as the option contract approaches its expiration date, which will further reduce the probability of profitability of the right position transaction. With this in mind, you may want to consider moving your position to the next month's contract in advance.
Correspondingly, for investors who hold obligated positions, the gamma value of the option contract will gradually increase when the expiration date of the option contract is approaching, making the option contract more sensitive to the volatility of the underlying asset.
This also means that it will become more challenging for obligors to hedge their risk, so they can consider moving to the next month contract in advance to avoid risk.
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.