As the name implies, option is a kind of option with a limited term and a derivative financial instrument based on futures. The essence of option is to price the rights and obligations in the financial field separately, so that the transferee of the right can exercise his right to trade or not to trade within a specified time, and the obligor must perform it. In the transaction of options, the party who buys options is called the buyer, and the party who sells options is called the seller. The buyer is the transferee of the right, and the seller is the obligor who must fulfill the buyer's right.
The pricing of options is very similar to that of insurance, which establishes that the function of options at the beginning of design is insurance function. For investors in futures, the market will fall in a certain period of time in the future, and holding long futures positions in their hands is definitely a loss. There are many reasons why investors are unwilling to change hands with short futures. One is because they predict that they will rise in the future and don't want to miss the good market of rising; Second, future positions is too big to sell in a short time. However, the emergence of options has alleviated such problems. Investors can buy put options while holding a large number of long future positions. You can not only hold the bulls in your hands, but also prevent the risk of falling.
The second function of options is profit function. If the basic form can be determined, you can sell options that are opposite to the basic form and get excess returns from them.
The third function of the option is the incentive function. Employee futures option is a very popular way to motivate employees. Many financial enterprises or high-tech enterprises with fluctuating performance will attract and retain senior talents by granting options to their core personnel. Especially for all kinds of newly established companies, the financial situation is usually relatively tight, and it is impossible to pay high salaries to the core personnel of the enterprise. By granting options, employees actually pay according to the company's "possible future income", which greatly reduces the current financial cost, and options will not affect the company's current shareholding structure, thus avoiding the impact of decentralized shareholding structure on company management. For employees who get the option, the unstable performance of the new company also means that the option may bring a considerable income in the future, which is also attractive enough for employees.
In addition, options also have a speculative function. Most options will not wait until the day of execution, so the bid-ask spread is also a good way to make a profit.
The development of derivatives market in the future will lead to the increase of positions and trading volume, which is good for brokerage business. Futures companies should do a good job in variety research and customer promotion tips in advance, which will help futures companies seize the opportunity in the margin market. However, fluctuations correspond to risks, which are difficult for hedging customers to grasp, and the hedging ratio and adjustment timing are difficult to control. Fundamental researchers of futures companies often study the relationship between supply and demand and the future price trend of various varieties, and should appropriately transform and expand their research into implied volatility. Develop consulting products on volatility management and provide them to hedging customers to gradually weaken the uncertainty of volatility in the hedging process of their positions.