Simply put, options are contracts, and the content of contracts is rights. It costs money to buy rights. This is the royal family. People who buy rights can use them or not, and people who sell rights bear obligations. As long as the buyer exercises his rights, then the seller must fulfill his obligations.
Main contract elements of options
Contract object: the basic assets agreed upon when purchasing the option contract. The contract target in the above figure is SSE 50ETF (target code: 5 10050). Contract type: supported option contract types, such as call option and put option contract unit: the contract unit of option refers to the number of underlying assets (such as securities, stocks or ETFs) corresponding to the option contract. Contract expiration month: the contract month of the option refers to the month when the option contract expires. Take the SSE 50ETF as an example. The contract expires in the current month, the next month and the last two quarter months (quarter months refer to March, June, September and 65438+February), that is, 65438+ 10 month in 2023. Then SSE 50ETF has the following four-month contracts: 2023 10 month, 202310 month (next month), 2023 12 month (last quarter) and 2024 March (last quarter). Exercise price: Generally speaking, there is more than one option exercise price. Take the SSE 50ETF option as an example. The exercise price adopts nine listing methods of N- 1-N (i.e. 1 flat value contract, four imaginary value contracts and four real value contracts). However, sometimes, if we actually look at the option trading market, we may find that there are more than nine exercise prices, as shown in the following figure.
This is because when designing an option contract, there is usually a flat contract, and four real contracts and imaginary contracts that are higher and lower than the flat price respectively. However, with the price fluctuation of the underlying asset (50ETF), the original contract may no longer meet the market demand, and the exchange will add new contracts with exercise prices as needed.
On-site option trading reference source: option sauce
Option trading mode
Buying and opening a position: buying a call option or a put option, and increasing the position held by the obligee after the purchase is completed. However, if the debtor's position of the same contract already exists, the debtor's position shall be hedged first, and then the creditor's position shall be increased. The position of buying and opening positions is called the correct position.
Selling and opening positions: that is, selling call options or put options, after the sale is completed, the position held by the obligor increases; However, if the creditor's position of the same contract already exists, the creditor's position should be hedged first, and then the debtor's position should be increased. Selling open positions is called an obligation position.
Buy-out: When the buyer of the option contract closes his position, he cancels the previously sold option contract by buying the same number of option contracts, that is, you have to hold the debtor's position to buy out, thus reducing the debtor's position.
Sell: The act of selling the same number of option contracts to cancel the previously bought option contracts when the seller of the option contracts closes his position. In other words, you have to hold the position of the right party before you can sell the position, and the number of contracts sold must not exceed the position held.
Open position contract of the exchange: the act of buying the corresponding underlying securities at the current price or at a slightly discounted price and selling the call option at the same time. The purpose of covering positions and opening positions is usually to reduce the holding cost or lock in the cost of buying the underlying securities in the future.
Open positions by covering: It means that investors sell corresponding call options (guaranteed by 100% cash bonds without cash margin) on the basis of owning the underlying securities, that is, they increase their covered positions by covering positions. Because there is a corresponding cash bond as a guarantee, it can be used to deliver cash bonds when exercising power, so it is called a covered position, which is essentially an open obligation position.
Covered liquidation: Covered liquidation refers to a trading order to buy options to close the contract or reduce the number of covered debt positions when holding covered debt positions.