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Risk analysis of financial options trading

1. Credit risk: one of the most common risks. That is, the risk of property losses due to the bankruptcy or inability of the counterparty to perform;

2. Market risk: the risk of financial option price fluctuations caused by changes in exchange rates, interest rates and other factors;

3. Operational risk: Also known as operational risk, it is the risk of loss caused by human error, fraud, and improper internal risk control. It is also the main target of current laws and regulations;

4. Liquidity risk: that is, the risk of contract holders transferring the contract and realizing it;

5. Settlement risk: also known as delivery risk, which is the risk caused by the failure of the counterparty to pay or deliver goods on time when the delivery period expires;

6. Systemic risk: the risk of general economic depression caused by political, economic, social and other general environments. Generally speaking, this type of risk is a risk that individual and institutional investors cannot avoid in economics;

7. Legal risk: The lack of strong restrictions and protection for transaction entities due to incomplete laws and regulations, or the lack of effective implementation of legislation. And due to the innovative nature of financial options, even if relevant regulations are promulgated, they lack stability and persuasiveness because they have not been tested by time and cases. 1. Leverage characteristics of financial options

Leverage is a characteristic of almost all financial derivatives. For options trading, investors only need to pay a small premium to trade. However, this characteristic of "making a big difference" makes it easy for people to ignore the 100% profit and loss risk that must be borne when delivery is due. Most investors who lack investment experience and lack awareness of risks tend to only focus on the size of the premium (i.e., the current cost) and the huge returns that can be generated in the future, but they tend to be lucky or overconfident about risks. In short, the astonishing magnification of financial options, which means "a mistake can lead to a mistake of a thousand miles", and the fact that the face value is far greater than the actual value, is one of the fundamental prerequisites for generating financial risks.

2. The autonomous agreement between the parties to the option contract is likely to be divorced from the real capital operation

3. For financial options, in theory, according to the principle of autonomy of civil and commercial law

Both parties can make any stipulations on the agreed price and contract quantity, as long as both parties accept it. However, this kind of unconstrained extreme situation The most imaginative game rules are likely to deviate from the operation of real capital and produce a huge bubble effect.

4. The decisive factor of financial options itself fluctuates violently and frequently

From the beginning, financial options were designed to avoid risks for basic financial instruments under the floating exchange rate system. Stock options, interest rate options and foreign exchange risks were invented respectively for stocks, bonds and foreign exchange risks. Forex options. It can be said that the premise for the birth of financial options is the confusing price trend of basic financial instruments.

5. Investment portfolios are highly professional, and the combination conditions of each group of transactions are different. It is difficult to formulate targeted regulations

The investment portfolios of financial options trading are ever-changing, and the prerequisites for each investment portfolio are different. How to How to delineate the demarcation level that can cover all these combinations should be the task of economists and legal experts working together.

6. There are potential risks according to the current accounting system

The trading object of financial derivatives is futures contracts. According to the current accounting standards, before the transaction results occur, there are no records of derivatives transactions in the balance sheets of both parties to the transaction. Financial Reports do not reflect underlying profits and losses. This causes a serious lag in the acquisition of information by senior management and provides a serious time obstacle for transaction supervision.

7. The existence of the over-the-counter market

The over-the-counter market refers to the market where transactions are conducted in places other than stock exchanges. Due to the opacity of prices and the lack of regulations on exchanges, it is often a trading venue for serious speculation, so OTC trading is also an important factor in risk causes. At present, OTC trading does not have legal status in my country. A series of regulations, opinions and notices issued by the State Council clearly stipulate that futures trading (including option trading) must be conducted in futures exchanges, and OTC trading is strictly prohibited.

8. Hot money speculation

The crazy prosperity of China's securities market is not unrelated to the speculation of some domestic hot money. Domestic hot money, represented by the remaining funds of private enterprises in Wenzhou, has no reasonable investment channels and its profit-seeking nature. Once any profit opportunities arise, they will swarm in, causing great potential risks of instability.

9. Misleading Investment

Some so-called "stock commentators" talk nonsense in the media for certain purposes, and their irresponsible remarks are accepted and believed by the public, which ultimately damages the income of the majority of investors.

10. Improper investment portfolio design

The financial option profit portfolio is a highly professional calculation result. Generally, individual investors often cannot accurately calculate the best profit point and stop loss point, thus bearing a certain amount of risk. The risk of loss due to improper portfolio design.

11. Excessive speculation

Take selling put options as an example.

In some cases, when investors are selling, they may not have the subject matter in hand. This method of speculation is very dangerous, because once the price trend deviates from expectations, the option seller needs to use the market price to move the subject matter from Buy it back in the market, then buy it at a high price and sell it to the option buyer at a low price. Although theoretically unlimited risk is only a small probability event, once it does occur, coupled with the leverage ratio, option sellers often do not have enough funds to buy back the underlying asset at the market price and then sell it at the agreed price. Looking at the major options loss events in the international market, most of the powerful financial groups were eventually forced into bankruptcy by huge amounts of money. This kind of high-risk speculation seriously endangers social order and is also the focus of legal regulation.