Introduction to copper options
Among the industrial products listed in China, cathode copper futures contracts have long listing time, mature market, active trading, good contract liquidity and continuity, relatively perfect investor structure and open, transparent and continuous prices. Compared with copper futures, copper options have more advantages in capital occupation, which can help enterprises enlarge profits and control losses. It is an effective tool for enterprises to carry out risk management, and at the same time, on-site trading also makes copper options more liquid and transparent.
Exercise mode
Compared with the American option contract, the copper option in the previous issue adopts the European exercise method, and the contract can be executed before or at any time of the expiration date. European option contracts requires its holders to perform the contract only on the due date. For industrial customers, the advantages of European option are more obvious: first, the uncertainty of European option management risk is small, which meets the needs of copper enterprises. Second, the seller's risk is easy to control. For the seller, the art option will take the form of combination to hedge the risk at the beginning of selling the option, thus ensuring the preservation and appreciation of the assets. Because of the fixed term, the seller can directly hold the European option when constructing the investment strategy, without considering the performance risk of the option being exercised at any time, thus ensuring the continuity of the portfolio. Third, it has anti-manipulation. Theoretically, the option seller has the motivation to manipulate the futures price on the maturity date, so that the real option becomes a virtual option. However, copper futures contracts are more liquid near the delivery month. In addition, domestic and foreign institutions have a high degree of participation, and domestic and foreign copper futures prices are closely linked. Therefore, European options can effectively prevent market manipulation.
Upper or lower limit
Ceiling price = settlement price of the option contract on the previous trading day+settlement price of the underlying futures contract on the previous trading day × price limit ratio of the underlying futures contract; The daily limit price =Max (settlement price of the previous trading day of the option contract-settlement price of the previous trading day of the underlying futures contract × daily limit ratio of the underlying futures contract).
It should be noted that if the futures contract is unilaterally traded on the same day, it will be "extended" on the next trading day, while the price limit of the option contract itself will not lead to "extended" on the next trading day; When futures contracts show unilateral quotes in the same direction for three consecutive trading days, the exchange may implement compulsory lightening measures, but it will not implement compulsory lightening measures for option contracts; If the futures contract shows unilateral quotation in the same direction for three consecutive trading days, and the exchange takes risk control measures of one-day suspension, the series of options corresponding to the futures contract will also be closed for one day; When the futures contract price limit is adjusted due to unilateral market, holidays, convention and other reasons, the prices of the corresponding series of option contracts will also change accordingly.
Volume limit
Copper futures options and copper futures are limited respectively. The positions of non-futures company members, customers and market makers of copper futures options are limited in absolute value, and futures company members do not have limited positions.
Statistical method of option position
Buying position of call option with the same target+selling position of put option with the same target; The buying position of put options with the same goal+the selling position of call options with the same goal.
Hedging business is divided into three situations.
Option self-hedging. On the last trading day, non-futures company members and customers can apply for hedging and liquidation of two-way option positions under the same trading code. By default, market makers implement option self-hedging business (which can be implemented every day).
The futures obtained after exercise are self-hedged. Option buyers can apply for hedging and closing their two-way future positions after exercising under the same trading code, and the hedging amount shall not exceed the future positions obtained by exercising.
Futures obtained after performance are self-hedged. Option sellers can apply for hedging and liquidation of their two-way future positions after performance under the same trading code, and the hedging amount shall not exceed the future positions obtained after performance.
Hedging and arbitrage quota management
Hedging amount can only be used in futures market, option market or both markets; However, the arbitrage quota can only be used for futures contracts, not for option contracts. Buying hedging amount = futures buying position+bullish buying position+bearish selling position; Selling hedging amount = futures selling position+bullish selling position+bearish buying position.
Appropriateness management standard
The appropriateness standard of individual customers can be simply summarized as "four necessities", including capital requirements, knowledge requirements, experience requirements, reputation requirements and so on. The appropriateness standard of general corporate customers can be simply summarized as "five necessities", including capital requirements, knowledge requirements, experience requirements, compliance requirements, reputation requirements and so on.
Business development ideas
Buy call option
Enterprises are optimistic about the market outlook and have the right to buy the underlying assets (such as copper futures contracts) at the agreed price (such as 48,000 yuan/ton).
Buy put option
The right to sell the underlying assets (such as copper futures contracts) at the agreed price (such as 48,000 yuan/ton) after the market prospect is bearish.
Sell call option
Judging that the price will not rise, suppose you sell a call option with an exercise price of 48,000 yuan/ton and charge a certain royalty. If the final price rises more than 48,000 yuan/ton, the buyer exercises the right and the seller is obliged to sell the underlying futures contract at the price of 48,000 yuan/ton; If the final price is less than or equal to 48,000 yuan/ton, the buyer chooses not to exercise his rights and the seller earns royalties.
Sell put option
Judging that the price will not fall, suppose to sell a put option with an exercise price of 48,000 yuan/ton and collect a certain royalty. If the final price is less than 48,000 yuan/ton, the buyer exercises the right and the seller is obliged to buy the underlying futures contract at the price of 48,000 yuan/ton; If the final price is greater than or equal to 48,000 yuan/ton, the buyer chooses not to exercise the right and the seller earns the royalty.
Application case analysis
Case 1: downstream processing enterprise/copper buyer
Due to the shortage of funds (or high cost), small and medium-sized enterprises can avoid the risk of rising raw materials by buying call options if they buy futures when they receive orders.
Compared with futures, options occupy less capital and have limited risks, which can enlarge profits.
Case 2: Copper smelter, trader/copper seller
At present, the copper price is 48,000 yuan/ton, and I am worried about the risk of price decline. At the same time, I don't expect the price to rise, but I hope to reduce the cost of inventory preservation:
In view of inventory, under the judgment that the price will not rise, put options (paying premium) and call options (earning premium) are bought at the same time, thus improving the efficiency of hedging and reducing the cost of hedging.