Option, like futures, is a contract. After paying a certain price to the seller, the option buyer has the right to buy or sell assets at a fixed price on or before a certain date. It is to give you the right to obtain equity at a certain price in a certain period of time in the future.
An option contract is a contract that enables the buyer to acquire the right to buy or sell the corresponding assets at a certain price on or before a certain date.
On the other hand, the seller, the other party to the option contract, is obliged to sell or buy the corresponding assets when the buyer decides to exercise his rights. The buyer will pay a certain fee for this option contracts, which is called royalty. And the seller will charge this fee.
For example, if there is a house, the current market price is 1 10,000. You expect the house price to increase in the next 1 month. Now I don't want to take so much money to take so many risks, and I don't want to miss this income.
At this time, you can sign a contract with the real estate agent, stipulating that after one month, you have the right to buy this house at the current price 1 10,000 regardless of whether the house price is rising or falling. To this end, you signed a contract with the real estate agent and paid 5000 yuan to the real estate agent.
The above contract is called option contracts, and the agreed price is 654.38+00,000 yuan, which is the exercise price, and the deposit of 5,000 yuan is called royalty, which is the contract price.
Source: Option Circle
Option contract involves many points, covering the basic characteristics and related elements of option contract.
Here are some key points of the option contract:
1. Target assets: the target assets associated with the option contract, which can be stocks, stock indexes, foreign exchange, commodity futures, etc.
2. Contract types (call option and put option): Option contracts are divided into call option and put option, which respectively give the holder the right to buy or sell the underlying assets in the future.
3. strike price: strike price is the price of buying or selling the underlying assets specified in the option contract, also known as strike price.
4. Maturity date: the term of validity of the option contract, and the maturity date is the deadline for the exercise of rights and the performance of obligations.
5. Premium: the cost of purchasing the option contract, that is, the price of the option.
6. Intrinsic value: If the option can be profitable if it is exercised immediately at present, then it has intrinsic value. For call options, the intrinsic value is equal to the current price of the underlying asset MINUS the exercise price; For put options, the intrinsic value is equal to the exercise price minus the current price of the underlying asset.
7. Time value: The total value of the option minus its intrinsic value represents the influence of the remaining time period of the option on its value.
8. Implied volatility: The market's expectation of the future volatility of the underlying assets affects the price of the option contract.
9. Contract size: The number of underlying assets involved in the option contract, usually expressed in standard contract units.
10. settlement: when the option contract expires, the delivery method of the underlying assets can be physical delivery or cash settlement.
1 1. Exchange: The exchange where the option contract is listed and traded.
12. security deposit: the money that the seller may need to pay to ensure the performance of the contract.
13. European options and American options: European options can only be exercised on the expiration date, while American options can be exercised at any time before expiration.
14. Opening, closing and exercising: Opening is the initial transaction of buying or selling an option contract, closing is the transaction of reverse closing, and exercising is the exercise when the option expires.
These key points are isomorphic with all aspects of the option contract, and investors should carefully understand and consider these elements before trading options.