The rules of the game of cumulative options are more biased towards investment banks. Because even if investors take a good look at the market, if the linked assets rise above the cancellation price, the contract will be terminated in advance, setting an upper limit for the banker's loss; However, if investors misjudge the market and there is no stop loss limit in the contract, the contract terms will multiply the losses.

If the price of linked assets falls sharply, investors can be required to increase the margin. Investors with insufficient funds are forced to stop selling cash and then receive the goods at the exercise price. If the value of linked assets continues to fall, investors' losses will become a bottomless pit. Selling also accelerated the decline in asset prices. If investors can't make up their positions, they can be cut and bear all the losses.

After the crash of Hong Kong stocks in 2008, investors lost about HK$ 600 billion due to accumulated stock options. Popular related stocks include blue chip HSBC Holdings, China Mobile, HKEx and China Life Insurance. The losers of this product also include CITIC Pacific, a blue-chip listed company in Hong Kong, which suffered huge losses due to speculating on accumulated options in the Australian dollar.

CITIC Pacific must buy Australian dollars at the exchange rate of 1 Australian dollars to 0.87 US dollars, regardless of whether the exchange rate of Australian dollars to US dollars is higher than 0.87 or lower than 0.87. If the exchange rate is higher than 0.87, then CITIC Pacific can make a profit, but it will be terminated when the profit limit is reached; If the exchange rate is lower than 0.87, the company needs to accept the Australian dollar at twice the amount. When the exchange rate keeps falling, the loss keeps increasing.

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Comparison between cumulative options and options

1. The price set by the cumulative option is an interval, and the price set by the option is fixed. Cumulative options only have the right to choose to buy or not to buy when the stock price is higher than the exercise price, and there is no limit to options.

2. Theoretically, the buyer's income of call option is infinite, while the loss is only the option fee, and the seller's loss is infinite, while the upper limit of the highest income is only the option fee, and the put option is similar. However, the buyer's income of the accumulated option is only the part between the exercise price and the cancellation price, but the loss is infinite.

Baidu Encyclopedia-Cumulative Options