Option is a financial instrument based on futures. The greatest charm of this financial derivative is that it allows the buyer of the option to lock the risk in a certain range. In essence, the option is to price the rights and obligations in the financial field separately, so that the transferee of the right can exercise his rights on whether to trade or not within a specified time, and the obligor must perform it. In option trading, the party who buys the option is called the buyer, while the party who sells the contract is called the seller. The buyer is the transferee of the right, and the seller is the obligor who must fulfill the buyer's right. Specific pricing issues are comprehensively discussed in financial engineering. Options are divided into call options and put options. The buyer of a call option has the right to buy related assets at a certain time and at a certain price; The buyer of a put option has the right to sell the relevant assets at a specific time and at a specific price.

The difference between options and futures;

1, different themes

The subject matter of futures trading is standard futures contract; The subject matter of option trading is a right to buy and sell. After purchasing the right, the buyer of the option gets the option. You can exercise the right to buy or sell the underlying assets within the agreed time limit, or you can give up exercising the right; When the buyer chooses to exercise his rights, the seller must perform the contract.

The symmetry of investors' rights and obligations is different.

The option is a one-way contract, and the buyer of the option can perform or not perform option contracts's rights after paying the option premium, without having to bear the obligation; Futures contracts are two-way contracts, and both parties to the transaction have the obligation to deliver futures contracts at maturity. If you are unwilling to actually deliver, you must hedge within the validity period.

2. Different performance guarantees

In option trading, the biggest risk of the buyer is limited to the paid royalties, so there is no need to pay the performance bond. However, the risk faced by the seller is greater, and the seller must pay the deposit as the performance guarantee. In futures trading, both buyers and sellers of futures contracts have to pay a certain percentage of margin.

3. The characteristics of profit and loss are different.

Option trading is a nonlinear profit and loss state, and the buyer's income fluctuates with the fluctuation of market price, and its maximum loss is limited to the premium of purchasing options; The loss of the seller fluctuates with the fluctuation of the market price, and the biggest gain (that is, the biggest loss of the buyer) is the commission; Futures trading is a linear profit and loss state, and both sides of the transaction are faced with unlimited profits and endless losses.

4. The function and effect of hedging are different.

Futures hedging is not about futures, but about the physical (spot) of the basic financial instruments of futures contracts. Because futures and spot prices will eventually converge, hedging can achieve the effect of protecting spot prices and marginal profits. Options can also be hedged. For the buyer, even if he gives up the performance, he only loses the insurance premium and protects the value of his purchase funds. For the seller, either the goods are sold at the original price or the insurance premium is guaranteed.