Features of options:

1. More effective risk management means

(1) Locking in the existing profits

If investors are worried about the falling price of the underlying assets and are unwilling to sell the underlying assets, they can pay less royalties to buy flat put options. If the underlying price falls, investors can use the profit of options to make up for the loss of the underlying price; If the underlying price rises, investors will lose their royalties, but the underlying assets they hold can continue to make profits.

For example, Xiao Zhang holds an ETF with the current price of 4 yuan/share, and has made considerable gains. In order to prevent the risk of ETF price decline, Xiao Zhang bought the ETF put option with the exercise price of 4 yuan/share with the premium of .3 yuan/share. If the ETF price falls, Xiao Zhang chooses to exercise the right to ensure that he can sell the ETF at the price of 4 yuan/share; If the ETF continues to rise to 5 yuan/share and Xiao Zhang gives up the exercise right, then the profit of 1 yuan/share brought by the ETF's rise can make up for Xiao Zhang's loss of royalties.

(2) Avoid spot trapping

An underlying asset held by an investor is in a falling market, but it is unwilling to stop because of the unknown situation. Investors can buy imaginary put options at the same time of buying the underlying assets and paying less royalties. If the future target price falls sharply, investors who have not purchased options can only sell at a low price if they want to stop loss; Investors who buy options can exercise and sell the underlying assets at the exercise price, thus achieving the purpose of stop loss; If the future target price rises, investors will lose royalties.

For example, Xiao Zhang holds an ETF with the current price of 4 yuan/share. In order to avoid the downside risk of the ETF price, he buys the ETF put option with the exercise price of 3.5 yuan/share with the royalty of .2 yuan/share. If the ETF price has fallen below 3.5 yuan/share when the contract expires, Xiao Zhang can guarantee to sell the ETF at 3.5 yuan/share; If the ETF price rises at that time, and Xiao Zhang can't exercise his rights, he will lose .2 yuan/share royalties.

second, provide two-way trading options

in stock trading, investors will only invest in stocks with rising opportunities. If the stock is in a falling market, investors can only control the risk by reducing the number of positions.

Stock option is different, it provides investors with two-way trading options. If investors expect the underlying price to rise, they can buy call options; If the target price is expected to fall, you can buy put options. No matter whether the target price goes up or down, investors are likely to make a profit.

third, reduce the cost of capital use

(1) improve the efficiency of capital use

Take the option as an example, investors can enjoy the benefits brought by the change of the target price by paying less royalties. If the target price does not rise, the loss of royalties.

For example, Xiao Zhang thinks that an ETF with the current price of 4 yuan/share will rise in the next month, so he buys a call option with the exercise price of 4.5 yuan/share, which expires in one month, with the royalty of .2 yuan/share. If the ETF rises to 5 yuan/share at the expiration of the contract, Xiao Zhang chooses to exercise, and the yield per share is (5-4.5-.2)/.2=15%. If Xiao Zhang only buys ETF, the yield per share is (5-4)/4=25%. By buying the call option, Xiao Zhang amplifies the investment income. If the ETF does not rise to 4.5 yuan/share by then, Xiao Zhang will not be able to exercise his rights, and the loss will be .2 yuan/share.

(II) Effective means to buy the underlying assets at a low price

Selling imaginary put options can be used as an effective means to buy the underlying assets at a low price. If the future target price does not fall below the exercise price and the option is not exercised, the investor can reap the royalty; If the future underlying price falls below the exercise price and the option is exercised, investors can buy the underlying assets at a lower exercise price.

for example, the current price of an ETF is 4 yuan/share, and Xiao Zhang plans to buy the ETF at the price of 3.5 yuan/share one month later. Therefore, he sold the ETF put option with a .2 yuan/share premium, which expired one month later and the exercise price was 3.5 yuan/share. If one month later, the ETF has not fallen to 3.5 yuan/share and the option has not been exercised, Xiao Zhang has earned .2 yuan/share royalties; If the ETF falls to 3.5 yuan/share or below, and the option is exercised, Xiao Zhang will buy the ETF at the price of 3.5 yuan/share and still earn royalties.

IV. Enhancing the position income

Investors plan to hold a certain underlying asset for a long time, and if it is expected that the price of the underlying asset will increase less in a certain period of time, they can sell the imaginary call option of the underlying asset. If the underlying price does not rise sharply, the option will not be exercised, and the investor will collect the royalty, and can continue to sell the call option to continuously improve the position income; If the underlying price rises sharply and the option is exercised, investors can also sell the underlying assets at a higher price.

For example, Xiao Zhang buys an ETF at the price of 4 yuan/share, and sells the ETF call option with the exercise price of 5 yuan/share at the premium of .1 yuan/share. When the ETF price does not rise to 5 yuan/share, the option is not exercised, and Xiao Zhang gets the royalty income of .1 yuan/share; When the ETF price rises above 5 yuan, the option is exercised, and Xiao Zhang can earn royalties and sell the ETF at the price of 5 yuan/share.