Case analysis of options and option hedging transactions
Hedging between options means that investors buy a call option with a composite stock index and a put option contract with a composite stock index at the same time, and use the income of one option to compensate the loss of the other option.
For example, an investor bought a call option on the composite stock index of new york Stock Exchange, which expired in June, and the agreed price was 150, at 1993+0. Two months later, the price of stock index futures contract rose to 165. At this time, the net income of investors is (165-65438+). Since the option will not expire until June, if the stock market continues to be optimistic, its profit will increase. However, the stock market is fickle, with ups and downs. In this way, the investment will be wasted. Therefore, in March, the investor bought a put option on the new york Stock Exchange composite stock index futures contract that expired in June. Assuming that the put option due in March and June has a premium of 15.5 points, the premium is 15.5x500 = 7750 USD. In June, the following two situations may occur: first, if the index continues to rise, for example, to 180, the investor will get $ (180-150) 500 =15000 by exercising his call option. Minus the insurance premium of the call option of $5,250. The net profit was $9,750. So investors also bought a put option in March, which can be invalidated when the stock market continues to rise, but the cost of buying this put option should be deducted from the profit, that is, 9750-7750=2000 dollars, and the actual profit of investors is 2000 dollars. In the second case, the stock market starts to fall in March, so investors' losses on call options can be made up by exercising put options.
Case analysis of hedging transactions between options and futures contracts
Hedging between options and futures contracts means that investors buy put options while buying stock index futures contracts. If there is a bear market in the stock market, he can make up for the loss in the stock index futures contract with the proceeds of put options. If there is a bull market, he will not exercise the put option and lose his option fee, but he can compensate the loss of the put option fee from the profit of the stock index futures contract.
For example, an investor expects the stock market to be bullish, which is convenient for him to buy stock index futures contracts due in June in March 1993. If the stock market really rises by June, investors can benefit from the increase in points. However, before the contract expires, the stock market may suddenly fall. In this way, investors will lose a lot. Cautious investors generally don't take this risk. He will buy an overview put option in the financial futures market when buying stock index futures contracts. Once the stock market falls, he can make up for the losses in stock index futures contract trading with the profits earned by put options. Of course, if the stock market is bullish, investors will not exercise the put option, and then deduct the cost of buying the put option from the profit on the stock index futures contract, so as to control the investment within a certain risk and obtain the maximum profit.