1, liquidation
The liquidation method of options is basically the same as that of futures, both of which are contracts bought (sold) before selling (buying). However, the option is quoted at a premium.
Step 2 exercise rights
For American options, the option buyer can issue an exercise option instruction at a specified time on all trading days when the option expires, and the option positions of the option buyers and sellers will be converted into corresponding future positions at the settlement on the same day.
Step 3 give up
Waiver refers to the expiration of the option contract, the buyer waives his rights and the seller's obligations terminate.
Liquidation of option buyer:
Selling the option contract: the option buyer can close the position by selling the option contract held in the market. This method is the most direct way to close the position.
Exercise: If the option buyer holds the real option, that is, the exercise is profitable, he can choose to exercise on the expiration date, thus obtaining the corresponding rights. This is also a way to close positions, but it needs to wait until the maturity date.
Liquidation of option sellers:
Buy-back of put option contracts: Option sellers can buy back the sold options by buying the same number and types of option contracts in the market. This method is the most direct way to close the position.
Close the position: the option seller can also close the position of the sold option through reverse trading with other investors. For example, if you sell a put option, you can close your position by buying the same number of options of the same type.
Hedging operation: Option sellers can also hedge in the stock market to reduce risks. This includes buying and selling the underlying assets on the exchange to hedge the price fluctuation of put options.
The forced liquidation of the option obligation warehouse may occur in:
Insufficient margin:
The option holder only needs to pay the premium when opening the position, enjoys the rights and does not assume the obligations, so there is no need to pay the deposit;
The option obligor needs to pay the initial margin when opening the position, and then calculate and pay the maintenance margin according to the closing price of the underlying securities and the settlement price of the option contract after the daily closing, and the maintenance margin is calculated once every trading day during the obligor's position;
According to the calculation results, some may be returned sometimes, but when the margin is insufficient, the investor will receive a notice to pay the margin, and must pay the margin within the specified time, that is, before the closing in the morning, otherwise he will face the risk of being forced to close part or all of his position until the margin meets the specified requirements.
Insufficient preparation for opening the underlying securities.
When the contract is adjusted, it will lead to the shortage of the underlying securities that lock the open contract. Investors need to replenish the underlying securities, and can directly lock the current bonds, or they can buy insufficient underlying securities in the secondary market and lock them on the same day, otherwise they will face the risk of forced liquidation;
Securities in transit generated by stock issuance and capitalization can also be used as open positions of the exchange.
Limited position
When the number of investors' positions exceeds the position limit, or the exchange adjusts the position limit, or the limit applied by investors expires, they will face the risk of forced liquidation, although this rarely happens.
In addition, there are forced liquidation in violation of the law.
Which warehouses are flat?
If the investor fails to make up the margin or the underlying securities within the specified time, and fails to liquidate the position by himself, the option management institution will forcibly liquidate the part with insufficient margin or the underlying securities, and give priority to liquidate the contracts with large positions and good liquidity in recent months.
Forced liquidation price
The contract price of compulsory liquidation is formed by market transactions. If the compulsory liquidation cannot be completely completed within the specified time due to the limit of the price limit or other reasons, the rest will be postponed to the next trading day to continue the liquidation until it is completed.