How should the profit and loss of options be calculated? Buyer's profit and loss = the favorable price difference (with intrinsic value) obtained by the buyer's bank-the price premium paid when the option was originally bought;
Profit and loss of the seller = price of the original put option-intrinsic value (expiration)
Close your position before the expiration date: each option contract has the same time-sharing chart and K-line chart as the corresponding target, which can be traded in real time during trading hours, so you can close your position at any trading time before the expiration date. The price trend of call options is generally proportional to the trend of the underlying ETF, while the price trend of put options is generally inversely proportional to the trend of the underlying ETF (understand the composition of option prices and you will know the logic behind this sentence).
How do options make a profit? When a person sells options, he charges the fee for purchasing options and undertakes the obligation to buy or sell specific stocks, currencies, commodities, etc. At a specific price within a specific time. If the price of the underlying asset does not rise before the expiration date of the option, the option seller can retain the fees charged and obtain income from the option buyer. Therefore, the profit of selling options depends on the stability of the underlying asset price.
If the price of assets rises, option sellers will face losses because they have to buy or sell assets at a price lower than the market price. Therefore, selling options is risky and needs careful consideration.
What is the option risk? fluctuations in prices
As option is a complex financial derivative product, it is easily influenced by many factors, and sometimes the price fluctuates greatly, which may lead to losses for both buyers and sellers of options. Therefore, investors are advised to set a stop-loss price before buying options and sell them appropriately when the price falls to the stop-loss price.
Exercise settlement
Refers to the risk of exercise failure and default that investors may face. For example, if the option holder fails to prepare enough funds or securities after exercising, it will be judged that the exercise has failed and the relevant rights cannot be granted. In addition, if the obligor of the option fails to prepare enough funds or securities for settlement on the maturity date, it will be judged as a breach of contract and may face penalties.
Option trading skills, diversification.
It is suggested that several different kinds of options should be purchased for trading, so as to reasonably spread the investment risk and reduce the risk of market shock. We can use the option portfolio strategy to choose different kinds of portfolio investment, reduce risks and improve returns.
Choose trading opportunities
Investors are advised to choose the right trading opportunity according to the market situation and their own capital situation, and not to trade under the condition of large market fluctuation and high risk.