What are the risks of stock option buyers?
Investors will become the right party of stock options after buying and opening positions. The so-called obligee means that it obtains a right by paying a certain fee (royalty) to the seller, that is, it has the right to buy or sell an agreed number of underlying securities from the option seller at an agreed price when the option expires. Of course, the right holder of the option can also choose to give up exercising the right.
For option holders, the risk is locked in one time, and the biggest loss is the premium paid, but the income can be great; For the option obligor, the income is locked in one time, and the maximum income is limited to the buyer's commission, but the loss may be great.
Investors may ask, it seems that selling options is risky. Buying options not only gives me the right, but also helps me lock in the loss. Is it safe to buy options? The answer is of course no. Let's look at the next example.
For example, the stock price of Company X is now 10 yuan, and the investor has paid the royalty of 100 yuan, bought 1 subscription option (assuming the contract unit is 100 yuan), and has the right to buy 10 yuan/share after three months. On the maturity date after three months, under the five scenarios that the stock price of X company is 8 yuan, 9 yuan, 10 yuan, 1 1 yuan and 12 yuan respectively, the returns of the two investment methods are compared.
It is not difficult to see that because of the high leverage of stock options, investors not only have greater potential income, but also bear higher market risks. The price fluctuation of the underlying securities will cause the option price to fluctuate greatly. If the option expires, the buyer will lose all royalties.
For investors, what are the main risks faced by the holders of stock options?
First, the risk of losing all royalties. After investors successfully buy and open positions, no matter how the market changes, they don't need to pay and add margin, and stay away from the "nightmare" of opening positions. The biggest loss is the patent fee paid when buying and closing the position, which is the advantage of the right party. However, investors should be reminded that if the options you hold are worthless when they expire, all the royalties you paid will be lost, in other words, your loss will be 100%, so the risk of "many a mickle makes a muckle" cannot be ignored. Therefore, the right holder of the option can't hold the position all the time, close the position when necessary and stop the loss in time. From this point of view, if investors regard buying options as a "game of gambling direction", they will face the risk of losing all their money.
Second, the risk of time loss. As the right holder of options, the most unfavorable thing is the loss of time value. As long as it does not expire, the option has time value, and there is the possibility of beneficial changes in the obligee. However, other things being equal, with the approach of the maturity date, the time value of the option decreases, and the value of the option held by the obligee also decreases accordingly. In other words, the rights possessed by the obligee are limited. If the price fluctuation of the underlying securities fails to meet expectations within the prescribed time limit, the position it holds will lose its value. Even if the investor's judgment on the market trend is correct, if the expectation is reached after the option expires, then the investor can no longer exercise his rights.
Although in some textbooks, the owner of stock options may be described as having the profit and loss characteristics of "limited risk and unlimited income". But in actual investment, the risk of rights is not as small as imagined. Therefore, investors should still pay close attention to the market and raise their awareness of risk prevention when holding positive positions.
Risk disclosure: This information does not constitute any investment advice. Investors should not substitute such information for their independent judgment, or make decisions only based on such information. It does not constitute any trading operation and does not guarantee any income. If you operate by yourself, please pay attention to position control and risk control.