Undoubtedly, making good use of futures and options tools can effectively solve the pain points in the operation of non-ferrous enterprises. The relationship between futures and options is that cooperation is greater than competition. Combining the two can provide a more accurate hedging plan.
Before formally participating in the market, we need to know the contract rules and important concerns of the upcoming aluminum-zinc option in detail.
Aluminum Option Contract (Draft for Comment)
Key points of contract
1. Minimum price change: 1 yuan/ton.
Internationally, the minimum change price of LME aluminum options is small, which is 0.0 1 USD/ton, which is the same as the underlying futures.
The minimum price change of aluminum futures is 5 yuan/ton. Theoretically, the minimum change price of options is generally half of the minimum change price of underlying futures, but in practice, the small premium problem of deep imaginary options needs to be considered. Therefore, considering comprehensively, the minimum change price of aluminum option is designed as 1 yuan/ton.
2. Scope of restriction: the same as that of the basic futures contract.
In order to effectively control risks and ensure that the option price changes synchronously with the underlying futures price, it is necessary to set price limits on aluminum option contracts, and the range of price limits is the same as that of the underlying futures. The range of the price limit is calculated by the ratio of the settlement price of the futures contract on the previous trading day to the price limit of the futures on that day. At present, the price limit of aluminum futures is 8%.
3. Contract month: The contracts for the last two consecutive months and the subsequent months will be listed on the second trading day after the settlement of the underlying futures contract position reaches a certain value, and the specific value will be released separately by the Exchange.
There are many options contracts, and the market generally reflects the pressure of trading funds; With the increase of the number of options, the pressure on the technical system of the exchange itself also increases.
Retaining the "contract for the last two consecutive months" will be beneficial to risk management in recent months and further promote the convergence of futures prices to spot prices in the delivery month.
Other contract months are listed after the position of the underlying futures reaches a certain value, and the relationship between options and futures should be fully considered to ensure that the liquidity of the underlying futures can be used to hedge risks when trading options, and at the same time promote the liquidity of options under the condition of limited market funds.
When the underlying futures positions reach 15000 lots, the corresponding options will be listed. (subject to the pre-listing announcement)
4. The last trading day and expiration date: the penultimate trading day of the first month before the delivery month of the underlying futures contract. The exchange may adjust the last trading day according to the national statutory holidays.
The last trading day of the option contract should be as close as possible to the last trading day of the underlying futures contract; And ensure that there is enough time to adjust futures positions after exercising; The last trading day of the option contract should not coincide with the last trading day of the futures contract one month before the basic futures contract.
In order to avoid the settlement pressure caused by the coincidence of the last trading day and the settlement date of some month options, the statement that the exchange can adjust the last trading day according to national legal holidays is reserved.
The expiration date is the same as the last trading day.
5. Exercise the price:
Executive price distance
The price fluctuation of aluminum futures is small, and the historical volatility is below 10% all the year round. Market institutions pointed out in the survey that the basic price of aluminum fluctuated around 100 yuan/ton. Considering that the aluminum price is 10000-20000 yuan/ton most of the time, the exercise price range in this range is set to 100 yuan/ton, and the exercise price ranges of other price ranges are set accordingly. At present, the ratio of the exercise price range of aluminum options to the exercise price range is 0.5%- 1%.
Calculation result
According to the simulation test of our aluminum futures contracts from 20 10 to 20 19, according to the current scheme (exercise price coverage 1.5 times futures price limit).
The daily average number of aluminum options listed contracts is 372, with a maximum of 765,438+00.
6. Exercise method: American style
① Greater flexibility: American options can be exercised at any trading time before the expiration date, which is more convenient for option buyers, and future positions can be obtained at any time when the market is favorable or actually needed. Especially for the option market, which may not be active enough in the initial stage of listing, the exercise of options can provide investors with another way to withdraw from the market, and investors can achieve specific investment purposes by exercising in advance under certain circumstances.
(2) Easy risk control: American option sellers cannot predict the exact time of option exercise. Even when the option expires, the option seller has the motive to manipulate the market, but the option buyer can choose to exercise at any time to avoid the risk of market manipulation. Investors can release risks by exercising in advance, which is also beneficial to the risk management and control of the exchange.
③ International experience: According to international experience, commodity options (especially agricultural options) are mostly American options. LME's aluminum option is also an American option.
④ Market point of view: At the enterprise symposium, most industrial customers supported Alcoa option. Most member companies also support American style.
Zinc Option Contract (Draft for Comment)
Key points of contract
1. Minimum price change: 1 yuan/ton.
Internationally, the minimum change price of LME zinc option is small, which is 0.0 1 USD/ton, which is the same as the underlying futures.
The minimum price change of zinc futures is 5 yuan/ton. Theoretically, the minimum change price of options is generally half of the minimum change price of underlying futures, but in practice, the small premium problem of deep imaginary options needs to be considered. Therefore, considering comprehensively, the minimum change price of zinc option is designed as 1 yuan/ton.
2. Scope of restriction: the same as that of the basic futures contract.
In order to effectively control risks and ensure that the option price changes synchronously with the underlying futures price, it is necessary to set price limits on aluminum option contracts, and the range of price limits is the same as that of the underlying futures. The range of the price limit is calculated by the ratio of the settlement price of the futures contract on the previous trading day to the price limit of the futures on that day. At present, the price limit of aluminum futures is 8%.
3. Contract month: The contracts for the last two consecutive months and the subsequent months will be listed on the second trading day after the settlement of the underlying futures contract position reaches a certain value, and the specific value will be released separately by the Exchange.
There are many options contracts, and the market generally reflects the pressure of trading funds; With the increase of the number of options, the pressure on the technical system of the exchange itself also increases.
Hanging the "contract for the last two consecutive months" all the time is helpful for risk management in recent months.
Steps to promote the convergence of futures price and spot price in delivery month.
Other contract months are listed after the position of the underlying futures reaches a certain value, and the relationship between options and futures should be fully considered to ensure that the liquidity of the underlying futures can be used to hedge risks when trading options, and at the same time promote the liquidity of options under the condition of limited market funds.
When the underlying futures positions reach 10000 lots, the corresponding options are listed. (subject to the pre-listing announcement)
4. The last trading day and expiration date: the penultimate trading day of the first month before the delivery month of the underlying futures contract. The exchange may adjust the last trading day according to the national statutory holidays.
The last trading day of the option contract should be as close as possible to the last trading day of the underlying futures contract; After ensuring the exercise, there is still
Have enough time to adjust future positions; The last trading day of the option contract should not be before the basic futures contract.
The last trading day of 1 month futures contract coincides with.
In order to avoid the settlement pressure caused by the coincidence of the last trading day and the settlement date of some month options, transactions are reserved.
The statement of the last trading day can be adjusted according to the national legal holidays.
The expiration date is the same as the last trading day.
5. Exercise the price:
Executive price distance
Zinc futures prices fluctuate greatly, and the historical volatility is around 20% all the year round. Considering that the price of zinc is 10000-25000 yuan/ton most of the time, the exercise price range of this range is set as 200 yuan/ton, and the ratio with the range value is kept at about 1-2%, and the exercise price ranges of other price ranges are also set accordingly.
Calculation result
According to the simulation test of our zinc futures contract from 20 10 to 20 19, according to the current scheme (the exercise price covers 1.5 times the futures price limit).
The daily average number of listed contracts for zinc options is 226, with a maximum of 4 16.
6. Exercise method: American style
① Greater flexibility: American options can be exercised at any trading time before the expiration date, which is more convenient for option buyers, and future positions can be obtained at any time when the market is favorable or actually needed. Especially for the option market, which may not be active enough in the initial stage of listing, the exercise of options can provide investors with another way to withdraw from the market, and investors can achieve specific investment purposes by exercising in advance under certain circumstances.
(2) Easy risk control: American option sellers cannot predict the exact time of option exercise. Even when the option expires, the option seller has the motive to manipulate the market, but the option buyer can choose to exercise at any time to avoid the risk of market manipulation. Investors can release risks by exercising in advance, which is also beneficial to the risk management and control of the exchange.
③ International experience: According to international experience, most commodity options options are American options. LME's zinc option is also an American option.
④ Market point of view: At the enterprise symposium, most industrial customers supported American options of zinc options. Most member companies also support American style.
Margin system
Under the traditional method of collecting margin, the standard of collecting margin for option sellers is the greater of the following two:
1. option contract settlement price × trading unit of the underlying futures contract+trading margin of the underlying futures contract -0.5× option contract imaginary value.
2. Settlement price of option contract × trading unit of the underlying futures contract +0.5× trading margin of the underlying futures contract.
explain
The traditional margin system is an early way used in the international options market, and its reliability has been tested by long-term practice. The advantages are:
1. The change of option margin is linked to futures margin. When the risk of futures market increases, the option margin and futures margin are adjusted synchronously, which is more convenient and effective for the management of the exchange.
2. When the price of the underlying futures contract changes, the option margin will not fluctuate greatly and has good smoothness, thus avoiding the settlement risk.
Price limit
Calculation formula of daily limit price:
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.
Ceiling 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 × price limit ratio of the underlying futures contract, minimum change price of the option contract).
explain
When the basic futures contract is unilaterally traded in the same direction for three consecutive days and the trading is suspended for one day on the fourth day, the option series contract of the basic futures contract I selected is suspended for one day. The reason for this is the following：
1. helps customers calm down and relieve market panic.
2. When the basic futures market is closed, market makers can't quote accurately in the options market, and market makers face huge price risks.
3. In the market research, most institutions suggest that when the underlying futures are closed, the options should also be closed.
Position restriction system
Adopt separate warehouse restrictions:
1. Non-futures company members and customers adopt absolute limit positions.
2. The division of option position limit in different time periods is consistent with the corresponding target futures position limit.
explain
◆ Statistical method of option position:
The buying position of a call option with the same goal+the selling position of a put option with the same goal.
The buying position of put options with the same goal+the selling position of call options with the same goal.
◆ Option overbooked:
1. One month before the contract enters the delivery month, the position limit standard is lowered, and the customer may exceed the position limit.
2. Associated account
The aluminum option and the underlying futures adopt the relationship of separate positions, 1: 1.
The relationship between the zinc option and the underlying futures with a separate position limit, 1: 1.
Hedging arbitrage
Hedging quota can only be used in futures market, option market or both markets.
Arbitrage quota can only be used for futures contracts, not for option contracts.
Calculation method of settlement price
On the expiration date, the time value disappears completely, and the intrinsic value is used as the option settlement price:
Call option settlement price = maximum value (settlement price of basic futures contract-exercise price, minimum change price)
Put option settlement price = maximum (exercise price-settlement price of the underlying futures contract, minimum change price)
On the unexpired date, the settlement price of each option contract is determined according to the implied volatility.
explain
Plane volatility assumption, that is, it is assumed that the implied volatility of all option contracts is the same in the same month.
This practice can effectively avoid the situation that the settlement price is obviously unreasonable, which conforms to the three principles of "stability" and "simplicity".
The method of obtaining surface volatility by fitting is complicated, and there are many abnormal situations to be considered, which is not easy for investors to understand.
Automatic exercise on maturity date
◆ Exercise application time: 2 1:00- 15:30 on the trading day before the expiration date.
◆ Application channels: trading system and service system.
◆ Automatic exercise by the exchange: After 15:30, the exchange will exercise automatically according to the settlement price of the futures contract of the day.
explain
Automatic exercise is the mainstream practice in mature international markets, mainly to prevent customers and brokers from forgetting to exercise real-value options when the options expire.
Set the time period as 15:00- 15:30, mainly to meet the special needs of some customers for shallow and virtual exercise; At the same time, it also solves the problem of applying for exercise of open warehouse receipts.
Self hedging
◆ Option self-hedging:
Non-futures company members and customers can apply for hedging and liquidation of two-way option positions under the same trading code. The hedging result is deducted from the option position of the day and included in the trading volume.
◆ 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. The hedging result is deducted from the future positions on that day.
It should be noted that the future positions obtained after the exercise can self-hedge with the investor's original future positions.
◆ 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. The hedging result is deducted from the future positions on that day.
It should be noted that the future positions obtained after the performance can be self-hedged with the investor's original future positions.