An option is the right to buy or sell a certain number of specific assets at a certain price at a certain time in the future.

1. Option trading is a right trading.

In futures option trading, the option buyer obtains the right to buy or sell a certain number of futures contracts from the option seller at a predetermined price (exercise price) within the time stipulated in the contract after paying a fee (royalty). After receiving the option fee paid by the option buyer, the option seller must unconditionally perform the obligations stipulated by option contracts as long as the option buyer requests to exercise his rights. In futures trading, buyers and sellers have equal rights and obligations.

In contrast, the rights and obligations of buyers and sellers in option trading are not equal. After paying the patent fee, the buyer has the right to execute and not to execute, but has no obligation; When the seller receives the royalty, no matter how unfavorable the market situation is, once the buyer proposes to implement it, he is obliged to perform the option contracts, but has no right.

2. Option is also a contract.

The terms in the contract have been standardized. Take wheat futures options as an example. For option buyers, the right to buy primary wheat futures usually represents the right to buy primary wheat futures contracts in the future. The right to sell primary wheat futures usually represents the right to sell primary wheat futures contracts in the future; The seller of the option is obliged to sell a certain number of wheat futures contracts to the buyer of the option at the exercise price at some future time according to the terms of the option contract. The seller of the put option has the obligation to buy a certain number of wheat futures contracts from the option buyer at the exercise price at some future time according to the terms of the option contract.

The price of an option is called a premium.

Option fee refers to the fee paid by the option buyer to the option seller in order to obtain the rights conferred by the option contract.

For option buyers, no matter where the price of wheat futures changes in the future, the biggest loss they may face is only royalties. This feature of options gives traders the ability to control investment risks.

For the option seller, the option fee is charged from the buyer in return for taking the market risk. The rights of the subject matter, but there is no obligation to buy or sell.

The buyer has the right of execution and the right of non-execution, and can choose flexibly.

1, options are divided into off-exchange options and on-exchange options.

OTC options trading is generally reached by both parties.

2. Options are divided into call options and put options.

Call option refers to a legal contract that gives the option holder the right to buy a certain number of assets or futures contracts at a specified price at a given time or at any time before this time.

Put option gives the holder the right to sell a certain number of assets or futures contracts at a specific price at a given time or at any time before. The holder of the option has the rights stipulated in the option, and he can exercise the rights or give up the rights, while the seller of the option only has the obligations stipulated in the option contracts.

Elements of the option include:

1.

That is, the final price, the price set by the option contract to buy or sell assets;

2. Maturity date

The last effective date of the option stipulated in the option contract is the option expiration date.

3. Basic assets

The assets agreed in the option contract are the underlying assets of the option;

4. royalties

The price at which the buyer and seller buy and sell options is called royalty or option price.