Someone commented: "Options are a surefire way to invest in U.S. stocks. Mastering option investment can allow investors to easily make profits under various market conditions. Some seemingly magical Investment effects, such as making money regardless of the rise or fall of stocks, can be easily achieved by using an option portfolio. "So trading options is an important feature of the American market.

Definition

An option, also known as Option in English, is a contract that gives the right to buy/sell an underlying asset at a specific price at a specific time. Options can bring excess returns and risks.

Classification

1 According to exercise time:

It is divided into American options, European options and Bermuda options. It should be noted that the biggest difference between the three is that the exercise time is not a regional restriction. American options mean that the option holder can exercise the option at any time during the entire period before the expiration date. European options can only be settled and exercised on the expiration date. Bermuda options are options that can be exercised within a series of times specified before the expiration date. Bermuda options can be viewed as a mixture of American options and European options.

2 According to option rights:

It is divided into call options and put options. A call option (Call Option) refers to an option contract in which the option buyer has the right to purchase a certain financial instrument at a certain time in the future at the exercise price; a put option (Put Option) refers to an option contract in which the option buyer has the right to purchase a certain financial instrument at a certain time in the future. An option contract to sell a certain financial instrument at the strike price.

Commonly used terms

Call: Call option, which gives the buyer the right to purchase the underlying contract on a certain day at the exercise price.

Put: A put option, which gives the buyer the right to sell the underlying contract on a certain day at the exercise price.

Long/buy: Buy, pay premium, purchase option rights, including buying call options or put options.

Short/sell: Sell, short sell the right, obtain the premium, and assume the obligation to be exercised in the future, including selling call options or put options.

Expiration date (Expiration): refers to the day on which the option will expire. If it is an out-of-the-money option, it will become 0 (automatically disappear) on this day. If it is an in-the-money option, it will expire. Options will be automatically exercised (buy/sell stock) on this day.

Standard contract: The contract that expires on the third Friday of each month is the standard contract. The most actively traded option contract in a month is the standard contract.

Strike price: refers to the buying/selling price when you exercise the option one day in the future.

In-the-money options (In the money): When the exercise price of a call option is lower than the market price, it is called an in-the-money option; when the exercise price of a put option is higher than the market price, it is called an in-the-money option. In-the-money options.

Out-of-the-money options: When the exercise price of a call option is higher than the market price, it is called an out-of-the-money option; when the exercise price of a put option is lower than the market price, it is called an out-of-the-money option. It is an out-of-the-money option.

At-the-money option: When the exercise price is exactly equal to the current stock price.