Agreements that meet three conditions (bilateral agreements, value and value depend on the underlying assets) are derivatives. The well-known derivatives include futures, swaps, forwards and options.
This tweet introduces the characteristics and functions of on-site financial options products from the following main aspects. (Take the SSE 50ETF option as an example).
No.65438 +0 asymmetry
Asymmetry of rights and obligations
Option trading structure:
In the above transactions, the rights and obligations of the buyers and sellers of options are asymmetric.
The buyer obtains the option-option by paying the royalty, and can choose to buy or sell a certain amount of the underlying assets (SSE 50ETF) from the seller at the agreed price on the exercise date, without any obligation to buy or sell.
The seller undertakes the obligations that must be fulfilled (when the buyer chooses to exercise) by collecting royalties, that is, on the exercise date, it sells or buys a certain amount of the underlying assets (SSE 50ETF) to the buyer at the agreed price according to the buyer's requirements, and does not have any right not to sell or buy.
Option is the securitization of option.
Asymmetry between risk and reward
In investment, it is normal for risks and benefits to coexist, and they are accompanied. Generally speaking, the greater the risk, the higher the income. However, the risks and benefits faced by buyers and sellers in option trading do not conform to this normal state.
Because the option buyer has options that can be selectively exercised, only the rights have no obligations, and its biggest risk is known-royalties, but theoretically the potential benefits are unlimited.
Because the option seller has to perform his obligations (when the buyer exercises his rights) and has no rights, his income is limited-royalties, but theoretically the potential risks are infinite.
The risks and benefits faced by buyers and sellers are asymmetric, which is also one of the charms of option trading.
Second insurance
In life, people buy insurance to share the losses caused by accidents and transfer such losses to insurance companies, such as auto insurance.
For the buyer who buys the option, the option can transfer the buyer's risk. The seller is equivalent to an insurance company, and collects the premium (commission) to bear the risks transferred by the buyer.
In the financial market, the insurance function played by options can achieve the insurance purpose of reducing the risk of falling market value of the underlying assets.
Option is the insurance of financial market.
Third place Xiao Yi Boda
An option contract corresponds to a certain number of underlying assets, and the buyer can lock in hundreds or even thousands of times of transactions of the underlying assets or earn multiple times of leverage income only by paying the transaction amount of the option contract.
Investors only need a 50ETF to buy the February 2400 contract (20 19):20 19 (the exercise date), and the buyer can buy 10000 SSE 50 ETFs from the investors who sold the contract at a price of 2.40 yuan/share.
2018 65438+February 28th.
At the close of the day, the price of 50ETF was 2.286 yuan, and the contract price was 0.04 1 1 yuan.
The cost for investors to buy an option contract is 4 1 1 yuan (excluding transaction costs).
2065438+February 25, 2009
At the close of the day, the price of 50ETF was 2.8 16 yuan, and the contract price was 0.4234 yuan.
If the investor sells the contract at 0.4234 yuan on the same day, the income will be 3,823 yuan, and the yield will reach 930. 17% (regardless of the transaction cost).
February 27th, 20 19 (exercise date)
At the close of the day, the price of 50ETF was 2.736 yuan, and the contract price was 0.332 1 yuan, which was in actual value.
If the buyer chooses to exercise on the same day, he can buy 10000 SSE 50ETF at the settlement date (2065438+February 28th, 2009) at a cost of 24,000 yuan (regardless of transaction costs).
At the close of the next trading day (2065438+March 2009 1), the price of 50 ETFs is 2.802 yuan. If the buyer sells and holds 10000 shares of SSE 50 ETFs at 2.802 yuan, he can make a profit of 3,609 yuan, with a yield of 878. 10% (regardless of the transaction cost).
The leverage effect of options can help investors realize small and wide returns.
Fourth, speculation and arbitrage.
Speculation refers to the trading behavior that investors use the price difference in the market to buy and sell and get profits from it. Speculators make trading behavior of buying or selling option contracts or their underlying assets by predicting the future trend of the market. If this judgment is the same as the future trend of market price, speculators can get speculative profits after closing their positions, otherwise they will bear losses.
Arbitrage is a speculative transaction with little or no risk. The risk-free arbitrage opportunity of options mainly comes from the deviation between the option price and the theory, which destroys the price balance between the original contract and the contract, and then produces the arbitrage strategy of zero risk and constant positive return.
The essence of arbitrage trading is to buy low and sell high, that is, to buy undervalued assets and sell overvalued assets. When the unreasonable price difference between assets is eliminated, investors will hedge their original trading positions in reverse. The profits generated during this period are arbitrage gains.
In summer, the price of local watermelons in Xinjiang is 30 cents/kg, while watermelons in Beijing are sold to 3 yuan/kg, so the unit price of watermelons in Xinjiang and Beijing creates arbitrage space (price difference). Arbitrators can buy watermelons in Xinjiang at a price of 30 cents/kg, and then transport them to Beijing for sale at 3 yuan/kg, from which they can earn arbitrage income of 2.7 yuan/kg (regardless of transportation costs).
The biggest difference between speculation and arbitrage is the size of certainty, which is probability. Arbitrage is a trading behavior that uses various market rules to do something in order to obtain a high probability of profit on the premise that the operation is basically determined in advance. In speculative trading, once you predict the wrong direction, you will have great risks.
The biggest difference between speculation and arbitrage is the size of certainty, which is probability.
Basic trading strategy
No.65438 +0 call option
The buyer pays a certain royalty to the seller and obtains the right to buy a certain number of basic assets from the seller at an agreed price at a specific time in the future.
trait
Unlimited income;
Limited loss (royalty).
No.2 call put option
The buyer pays a certain royalty to the seller and obtains the right to sell a certain amount of basic assets to the seller at an agreed price at a specific time in the future.
trait
Limited income (higher income);
The loss is limited.
Put option no.3
The seller collects a certain royalty from the buyer and undertakes to sell a certain amount of basic assets to the buyer at an agreed price at a specific time in the future.
trait
Limited income (royalties);
The loss is infinite.
Put option No.4
The seller collects a certain royalty from the buyer and undertakes the obligation to buy a certain amount of basic assets from the buyer at the agreed price at a specific time in the future.
trait
Limited income (royalties);
Limited loss (high loss).
Because of these characteristics and functions, options are called the jewel in the crown of financial derivatives. Compared with other financial instruments, although the transaction structure of options is more complicated, it has unique functional characteristics and is an indispensable risk management and investment tool for investors to invest in finance. More functions and trading strategies hidden behind options are waiting for you to explore and use, expecting you to discover the beauty of options.