1. Real option
When the exercise price of a call option is lower than the current market price of the subject matter, it is beneficial to the buyer of the option. This option is called an in-price option. Some people also translate "in-price" into "in-price option", and there is no difference between the two.
For example, the exercise price of the call option on the Shanghai and Shenzhen 300 stock indexes is 2700 points, while the current Shanghai and Shenzhen 300 stock indexes are 2750 points. Obviously, this time is beneficial to the buyer of the option, because assuming that the option can be exercised at present, that is, it is equivalent to buying at the price of 2700 points, and immediately closing the position at the current market price will realize a profit of 2750-2700 = 50 points.
When the strike price of a call option is much lower than the market price of the subject matter at that time, the option is called a deep option.
When the exercise price of the put option is higher than the market price of the subject matter at that time, it is beneficial to the buyer of the option. This choice is also worth the money. Similarly, when the exercise price of a put option is much higher than the price of the subject matter at that time, the option is called a deep real option. For example, the exercise price in the Shanghai and Shenzhen 300 stock index put option contract is 2700 points, while the current Shanghai and Shenzhen 300 stock index is 2550 points. Obviously, this time is beneficial to the buyer of the option, because assuming that the option can be exercised at present, that is, it is equivalent to selling at the price of 2700 points, and immediately closing the position at the current market price will realize a profit of 2700-2550 = 150 points.
2. Virtual options
When the exercise price of the call option is higher than the market price at that time, it is unfavorable for the buyer to exercise. This choice is called out-of-price investment. There is also the translation of "out-of-price" into "out-of-price options", and there is no difference between the two. When the strike price of a call option is much higher than the market price of the subject matter at that time, the option is called a deep out-of-price option.
For example, the exercise price in the call option contract of the Shanghai and Shenzhen 300 stock indexes is 2700 points, while the current Shanghai and Shenzhen 300 stock indexes are 2550 points. Obviously, it is not cost-effective for the buyer to exercise the option at this time, because if he exercises the option, the purchase price is 2700 points, so it is better to buy it directly in the market at the market price, which can save 2700-2550 = 150 points. Therefore, the buyer of the option will not exercise its rights at this time.
When the exercise price of a put option is lower than the market price of the subject matter at that time, it is unfavorable for the buyer of the option to exercise the exercise, and this option is also a virtual option. Similarly, when the exercise price of a put option is much higher than the price of the subject matter at that time, the option is called deep imagination option. For example, the exercise price in the Shanghai and Shenzhen 300 stock index put option contract is 2700 points, while the current Shanghai and Shenzhen 300 stock index is 2800 points. Obviously, it is not cost-effective for the buyer to exercise the option at this time, because if he exercises the option, the selling price is 2700 yuan. It is better to sell it directly in the market at the market price, and he can sell 2800-2700 = 100 points more. Therefore, the buyer of the option will not exercise its rights at this time.
3. Equivalent option
Whether it is a call option or a put option, when the exercise price is equal to the market price of the target at that time, the option is a price option, and "price" is also translated into an equal option.
The above situation is summarized as shown in the following table.
Real options, virtual options and flat options.
Note: The names of real option, virtual option and equivalent option are all based on the position of the option buyer, and are classified according to whether the exercise at that time is beneficial to the buyer. If the call option is in the real value state, then the put option with the same exercise price and subject matter must be in the virtual value state, and vice versa.