Option, also known as option, means that its holder has the right to buy or sell a certain number of specific objects to the other party at a certain price in the future or on a certain date, but has no obligation.
Difference: 1, different themes.
The object of futures trading is commodities or futures contracts; The subject matter of option trading is the right to buy and sell commodities or futures contract options.
2. The symmetry of investors' rights and obligations is different.
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; The option is a one-way contract, and the buyer of the option has the right to perform or not to perform the option contracts after paying the insurance premium, without having to bear the obligation.
3. Different performance guarantees
Both buyers and sellers of futures contracts must pay a certain amount of performance bond; In option trading, the buyer does not need to pay the performance bond, but only requires the seller to pay the performance bond, which shows that he has the corresponding financial resources to perform the option contracts.
4. Different cash flows
In option trading, the buyer has to pay the insurance premium to the seller, which is the price of the option, which is about 5% ~10% of the price of the traded commodity or futures contract; Option contracts can be circulated, and their insurance premiums will change according to the changes in market prices of traded commodities or futures contracts. In futures trading, both buyers and sellers have to pay an initial deposit of 5% ~ 10% of the face value of the futures contract, and during the trading period, they have to collect additional deposits from the losing party according to the price changes; The profitable party may withdraw the excess margin.
5. The characteristics of profit and loss are different.
The income of the option buyer fluctuates with the change of market price, and its loss is limited to the insurance premium of the option; The seller's income is only the insurance premium of selling options, but its loss is not fixed. Both sides of futures trading are faced with unlimited profits and endless losses.
6. The function and effect of hedging are different.
The hedging of futures is not about futures, but about the target (spot) 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.
Forward contracts and futures contracts are very similar and easy to be confused. Because these two contracts are contract transactions, both parties agree to buy or sell a certain amount of goods at an agreed price at a certain date in the future. The difference between them is that:
1, trading places is different. Futures contracts are traded on the exchange, which is open, while forward contracts are traded outside the exchange.
2. The normative nature of contracts is different. Futures contracts are standardized contracts, and the variety, specifications, quality, delivery place and settlement method of the contracts are uniformly stipulated except the price. All matters of a forward contract must be determined by both parties through negotiation, which is a complicated but adaptable process.
3. Different transaction risks. Futures contracts are settled through a special settlement company, which is a third party independent of buyers and sellers. Investors are not responsible for each other, there is no credit risk, only the risk of price changes. The forward contract is delivered only when it expires, and the payment has long been unchanged, so there is no price risk. Its risk comes from whether the other party really performs the contract at that time and whether it can pay after physical delivery, that is, there is credit risk.
4. The deposit system is different. Both parties to the futures contract pay the deposit according to the specified proportion, while the forward contract is not standardized and there is credit risk. Whether or not to pay the deposit or deposit and how much to pay it are also agreed by both parties, and there is no uniformity.
5. Different responsibilities. Futures contracts have hedging mechanism, large performance space, extremely low physical delivery ratio, and the transaction price is limited by the minimum price change unit and daily trading amplitude. If the forward contract is to be cancelled midway, both parties must agree. No unilateral will can terminate the contract, and the proportion of physical delivery is extremely high.
Future and near future of futures contracts
Futures contracts are divided into short-term contracts and long-term contracts because of different delivery periods, and they also show different trading characteristics.
When a commodity futures contract has just been listed, it is not active because of the long delivery period, many market uncertainties and little confidence and interest of traders, so the contract at this time is a "forward contract". As time goes by, various factors affecting futures prices gradually appear, more and more market participants participate in trading, and the volume and short positions are also enlarged, and "forward contracts" will gradually become active and become "leading contracts". With the arrival of the delivery deadline, various factors affecting the futures contract price will gradually become clear and fixed, market participants will gradually accept the reality, and the party making money or losing money will gradually withdraw from the market and enter a new battlefield. At this time, the futures contract will become a "recent contract".
Judging from the transaction characteristics, the recent contract represents the level of spot price because it is close to delivery, and the price fluctuation is often small and the direction is relatively fixed. Even if there is a big fluctuation, it will eventually develop in the original direction. Another main reason why the recent contract price trend is "fixed" is that after fierce competition, both sides have won and lost, and it is difficult to repeat it.
Forward contracts are characterized by many unknowable factors and great fluctuations, which are difficult to master. Another feature is that its price represents the market expectation.