There are two types of options: buyers and sellers. Buyers and sellers have their own characteristics. However, in order to succeed in option operations, ordinary investors need to have certain financial knowledge and skills. , and maintain a cautious and rational attitude. Having said so much, some options novices who are just getting started still don’t understand options very well. So what are the functions of options? What do options mean?

Options are such a financial derivative. Different from futures, options are an option, not an obligation. They are also divided into call options (also called "call options") and put options ("put options"). option"). For example, if you want to buy a Tesla model 3, but you are not sure whether you still want to buy it in a year. So you sign a contract with the merchant now, pay a small deposit to the merchant, and agree to buy it next year. Then next year, if you have no money, or you don't want to buy it, it doesn't matter, the contract will automatically expire and be void, and the deposit will of course go to the merchant. This contract actually contains the concept of "option". What do options do?

Options can effectively control risk

The non-linear characteristics of option risk and return theoretically ensure that the return of buying options is infinite but the risk is relatively limited. Although the winning rate of option buyers is It is lower, but each loss is limited to the option fee, which is also an undoubted fact.

Options can increase potential returns

When doing fund management, we generally determine positions based on losses. If the unit risk is relatively large, our positions will be reduced accordingly, which is also This reduces our potential profit space. If we use options to implement this strategy, because the maximum loss is limited to the option fee, the position can be opened accordingly and the potential profit will be relatively large. What are the advantages of options?

Flexibility of options

The flexibility of option trading is reflected in the freedom to choose trading time, transaction price, asset type, etc. The time for option trading can be one month, three months, six months, etc., which can be selected according to market conditions and personal needs.

The Leverage Effect of Options

Another advantage of options trading is the leverage effect. Leverage means that options trading allows you to control a larger asset with a small amount of capital. What should we pay attention to with options?

The position is the size of the transaction amount when we trade. Many investors often trade with a full position or a heavy position. Both of these are not recommended because large positions carry the risk of rapid losses. We need to replenish the account funds. If there is no funds, the position may be forced to be liquidated at the lowest point, which will cause greater losses. If we trade with a small position, then if there is a risk, we can still open a new position and make a backhand, which can limit the loss amplification and may also take the opportunity to make a profit.