P=L·E-γT·[1-N(D2)]-S[1-N(D1)] This is the put option initial price pricing model.

C—The initial reasonable price of the option

L—The delivery price of the option

S—The current price of the financial asset being traded

T—The validity period of the option

r—Continuously compounded risk-free interest rate H

σ2—Annualized variance

N()—Cumulative probability distribution function of normally distributed variables

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Example: On January 1, the execution price of copper futures is US$1,750/ton. A buys the right and pays US$5; B sells the right and earns US$5. On February 1, the price of copper fell to US$1,695/ton, and the price of put options rose to US$55. At this time, A can adopt two strategies:

Exercise right one: A can buy copper from the market at the mid-price of 1,695 US dollars/ton and sell it to B at a price of 1,750 US dollars/ton. , B must accept, A gains $50 (1750-1695-5), and B loses $50.

Selling the right: A can sell the put option at $55. A makes a profit of US$50 (55-5).

If the price of copper futures rises, A will give up this right and lose US$5, while B will gain a net gain of US$5.