Covered options are divided into covered call options and covered put options.
Among them, covered call option portfolio means that investors hold call option selling positions and the same number of underlying futures buying positions; Covered put option portfolio means that investors hold put options and sell positions, and hold the same number of underlying futures and sell positions at the same time.
The application scenario of covered call option portfolio is that investors hold the underlying futures bulls, but the market outlook is expected to dominate, with resistance above, and the breakthrough probability is very low. Its advantage is that it can get extra commission income besides normal basic futures investment, improve investment income in oscillating market and smooth the income curve in falling market. The disadvantage is that once the underlying futures market rises sharply, investors need to transfer the profits of the underlying futures to the exercise price of selling call options, which is quite equivalent.
The application scenario of covered put option portfolio is that investors hold short positions in the underlying futures, but the expected market outlook is dominated by oscillation, with downside support and low breakthrough probability. Its advantages and disadvantages are similar to covered call option portfolio.
"Coverage", as its name implies, means that for the seller of the option, when selling the option, the corresponding target is prepared to hedge the performance risk.
Specifically, if the seller of the call option holds the underlying bulls at the same time, even if the price rises, he is forced to perform, and the gains from holding the underlying bulls can completely hedge the losses caused by being forced to perform. For a seller of put options, if he holds the underlying short at the same time, even if the price falls and he is forced to perform, the gains from holding the underlying short can completely hedge the losses caused by being forced to perform.
In short, when the option seller holds the corresponding target that can hedge the performance risk, its performance ability is guaranteed. In fact, there is no need to collect another deposit from the option seller to ensure its performance. Therefore, the margin collection standard of the covered option portfolio compiled by Zheng Shang is optimized as the sum of the premium and the underlying futures trading margin.
Different from the straddle option portfolio and wide straddle option portfolio constructed by Zheng Shang, the covered option portfolio constructed by Zheng Shang does not require investors to use special instructions. As long as the customer holds positions that can form a covered option portfolio, at the daily settlement, Zhengshang Institute will automatically identify qualified options and future positions as covered option arbitrage positions, including covered call option arbitrage and covered put option arbitrage, and give margin concessions.
For example, when investors open short positions of SR709P6700 and SR709 in intraday trading, they can form a put option reserve portfolio, which is charged according to the normal margin of intraday trading. After settlement, the exchange automatically confirms the above positions as a put option reserve portfolio, and collects the margin according to the sum of the premium and the underlying futures trading margin. The contents of the relevant option simulation report are as follows (futures margin rate 10%):
From the report, we can see that after the exchange automatically confirms the covered portfolio at the time of settlement, the corresponding option sellers in the portfolio no longer charge the margin, and the option premium is included in the sugar futures margin according to the settlement price of 435.5 (11089 = 6734×10×/kloc-0%+435.5).
For the covered portfolio, the automatic combination only affects the margin, which saves the margin for investors and has no effect on the closing of the portfolio position. Investors can usually close their positions, regardless of whether the position belongs to the covered portfolio or not.
In addition, it is also necessary to remind investors that when establishing the positions of portfolio components covered by options, it should be noted that the months of futures and options should be consistent. For example, SR709P6700 needs to establish a sugar futures contract in September. If sugar futures contracts in other months are established, a hedging portfolio cannot be formed.