election
Option is a financial derivative, which gives the holder the right to buy or sell a specific asset at a specific price at a specific time in the future, but not the obligation. The risks of options mainly include the following aspects:
Time value decay risk: the value of options is closely related to the length of remaining term, and the time value of options will gradually decay over time.
Directional risk: the buyer of the option can choose to be bullish or bearish. If the investor makes a wrong prediction, the invested capital may be lost.
Fluctuation risk: the price of options is closely related to the fluctuation of underlying assets. If the volatility is lower than the market expectation, the price of the option will also be affected.
Relatively speaking, the leverage of options varies in different contracts, especially the hypothetical option contract, which has the highest leverage and the greatest risk. Because option price is closely related to time value, directionality and volatility, more accurate market forecasting and risk management are needed to obtain income.
future
Futures is a standardized contract, which stipulates the obligations of buyers and sellers to buy and sell specific assets at a specific price at a specific time in the future. The risks of futures mainly include the following aspects:
Leverage risk: The leverage effect of futures is greater, and it can control a larger market value with less funds, so it can bring higher returns, but the risk also increases accordingly.
Directional risk: the buyer of futures can choose to be bullish or bearish. If investors make wrong predictions, they may lose their invested capital.
Delivery risk: the buyer and seller of futures must trade at the agreed price on a specific date. If investors fail to perform in time, they may face the risk of default.
Relatively speaking, the leverage of futures is relatively large and the risk is relatively high. But if we can correctly predict the market trend, futures can bring higher returns.