The income and risk of the call option buyer are asymmetric. When the asset price rises 1 yuan, the buyer's income increases by 0.9 yuan, while the asset price falls 1 yuan, and the buyer only loses 0. 1 yuan. Obviously, the buyer has the right to decide whether to exercise his rights, and the seller cannot make money on the due date. So, why are options buyers and sellers willing to sign such a contract? We can get the reason from the above example. When the buyer and the seller sign a contract, the buyer must pay the seller an initial price, that is, a premium (also called premium), to compensate the seller's disadvantage on the due date. It is also the asymmetry of income and risk that makes call options often used for speculation.
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Call option has leverage effect. We can calculate the return of call options by taking the return of option positions as a function of the maturity price of the underlying assets. After that, the future value of the option price can be subtracted from the income to get the income of the call option. The profit and loss of the call option (put option) seller is just the opposite of the profit and loss of the call option. The maximum profit of the call option seller is limited to the option price, but its maximum loss may be very large. When the asset price exceeds the contract execution price, its losses are: asset price-contract execution price-future value of option price.
Risk-return characteristics of put options: buying put options is also called multi-put options. Like the call option, the risk of the put option buyer is very limited, only within the option price range, but it has all potential income opportunities. Put option buyer's income and risk are asymmetric. Regardless of the asset price, the buyer only loses 1 yuan, but the put option buyer enjoys all the potential benefits brought by the decline in asset price. It can be seen that the income from buying put options is: contract execution price-asset price-future value of option price. Put option is also called put option, and its profit and loss are opposite to put option. Option price is the biggest gain of put option, but it must bear the loss caused by the decline of the underlying asset price.
Prevention of asymmetric risk: From the perspective of the relationship between income and risk of option contract, the application of option contract can effectively prevent asymmetric risk. Futures contracts and forward contracts can prevent the risks caused by the reverse change of asset prices by locking in asset prices, but these contracts cannot avoid the risks caused by the same change of asset prices. That is to say, futures contract bulls and forward contract bulls represent the obligation to buy the underlying assets at an earlier agreed price, while option bulls represent the right to buy the underlying assets at an earlier agreed price under favorable circumstances.
Options play an insurance role in losses, and insurance policies are put options for the insured assets. We can regard the call option as the insurance of the underlying assets we plan to own in the future (that is, the insurance of short positions), while the put option is the insurance of the assets we already own (that is, the insurance of long positions), and the option price (discount) is the insurance cost. Forward contracts are free, so without this insurance, its potential losses will be greater than the potential losses of call options. Obviously, option contracts have irreplaceable advantages over forward contracts and futures contracts in hedging, and option contracts are more efficient than futures contracts.