The out-of-the-money option contract will automatically return to zero when it expires. The system will not automatically exercise the option if there is no value. The exercise is for the real-value option contract.

Three states of option contracts

According to the relationship between the current price of the underlying security and the exercise price of the option contract, option contracts can be divided into: real-value options, at-the-money options and virtual options. value options.

For call options:

1 Real-value contract: refers to a contract with an exercise price lower than the current price of the underlying security (exercise price < market price). The further apart the two prices are, the greater the real-valued contract. The larger the value.

2 At-the-money contract: Generally speaking, a contract whose exercise price is equal to or closest to the current price of the underlying security (exercise price = market price).

3 Out-of-value contract: refers to a contract whose exercise price is higher than the current price of the underlying security (exercise price > market price). The further apart the two prices are, the greater the out-of-value contract.

Let’s give an example:

Assume that the current trading price of the underlying security is 20 yuan, and the call option contracts with exercise prices of 18 yuan, 20 yuan, and 22 yuan respectively are in-the-money. Options, at-the-money options, and out-of-the-money options.

Assume that the investor has bought a call option contract with an opening exercise price of 18 yuan, and the current price of the underlying security is 20 yuan. If the investor can exercise the option immediately, then the investor can buy the underlying security at a price of 18 yuan, and the current price of the underlying security is 20 yuan. For the investor, this exercise operation has "real" value. , so when the price of the underlying security is 20 yuan, the call option contract with an exercise price of 18 yuan is a real-valued option contract.

When the price of the underlying security and the exercise price of the call option contract are both 20 yuan, it is the same for investors whether to exercise or not exercise the option. At this time, the call option contract is an at-the-money contract.

When the price of the underlying security is 20 yuan and the exercise price of the call option contract is 22 yuan, as the buyer of the call option, he will definitely not choose to buy the security at the price of 22 yuan. The option contract is in a virtual state. value status.

From the above example, we can summarize a method for judging the value state of an option contract: Assume that the buyer of the option contract will exercise the option immediately. After the option is exercised, the option buyer will be able to bring profits to the contract. It is a real-valued option; if there is no loss or profit, it is an at-the-money option; if it makes a loss, it is an out-of-the-money option.

Then, using this method, we can easily know that for put options, in-value contracts should refer to contracts with an exercise price higher than the current price of the underlying, and out-of-value contracts refer to contracts with a lower exercise price. A contract based on the current price of the underlying asset, which is exactly the opposite of a call option.

Characteristics of the three states

Now that we understand the concepts of real value, at-value, and out-of-value options contracts, let’s take a look at the characteristics of the three states in order to better understand Select a contract.

Real-valued options contracts

The single price of real-valued options contracts is relatively high, and the leverage ratio shown when the market changes drastically is relatively low. At the same time, the negative impact of the passage of time on the price of real-valued options contracts is relatively small. For investors, buying and opening real-valued options contracts is a relatively stable choice.

At-the-money option contracts

At-the-money contract trading prices are moderate, the leverage effect is moderate, and market transactions are relatively active. At the same time, the negative impact of the passage of time on at-the-money option contracts is the most obvious. Compared with Suitable for investors short-term trading.

Out-of-the-money option contracts

The trading price of out-of-the-money contracts is relatively low. When the market fluctuates violently, it can often bring significant leverage effects to investors. However, investors who buy When opening an out-of-the-money option contract, the profit conditions are relatively high and the transaction winning rate is low. Therefore, investors should control their positions in opening out-of-the-money option contracts within their own risk tolerance.