The right to choose is a right. An option contract includes at least a buyer and a seller. The holder enjoys rights, but does not assume corresponding obligations.
2. The object of the option. The subject matter of an option refers to the assets you choose to buy or sell. Including stocks, national debt, currency, stock index, commodity futures and so on. Options are derived from these subject matter, so they are called derivative financial instruments. It is worth noting that the option seller does not necessarily own the underlying assets. Options can be "short". Option buyers may not really want to buy the underlying asset. Therefore, when the option expires, both parties do not have to make physical delivery of the subject matter, but only need to make up the price according to the price difference.
3. Due date. The expiration date of the option agreed by both parties is called "expiration date", and if the option can only be executed on the expiration date, it is called European option; If an option can be exercised at any time on or before the expiration date, it is called an American option.
4. Execution of options. The act of buying and selling the underlying assets according to the option contract is called "execution". The fixed price agreed in the option contract for the option holder to buy and sell the underlying assets is called the "exercise price".
Option price is mainly composed of connotation value and time value.
1, connotative value. Connotation value refers to the total profit that can be obtained when the contract is performed immediately. Specifically, it can be divided into real options, imaginary options and leveling options.
(1) real options. When the exercise price of a call option is lower than the actual price at that time, or the exercise price of a put option is higher than the actual price at that time, the option is a real option.
(2) Virtual option. When the strike price of a call option is higher than the actual price at that time, or when the strike price of a put option is lower than the actual price at that time, the option is a virtual option. When the option is a virtual option, the intrinsic value is less than zero.
(3) Even options. When the strike price of a call option is equal to the actual price at that time, or when the strike price of a put option is equal to the actual price at that time, the option is an equal option. When the option is a flat option, the intrinsic value is zero.
2. Time value. The longer the time between the option and the expiration date, the greater the possibility of sharp price changes, and the greater the chance for the option buyer to make a profit by exercising the option. Compared with short-term options, option buyers pay higher royalties for long-term options.