Option is a derivative developed on the basis of forward and futures, and its function is to provide more risk management functions. More formal options trading may appear in Holland in 16 and 17 centuries. At that time, international trade in Europe was very developed, and many businessmen held forward or futures contracts, but they were worried about the decline in the price of this commodity, so they wanted to find someone to share the risk.
For example, paying the other party a little money and agreeing to sell the goods to the other party at an agreed price on a certain day is a put option.
By the same token, other people who sell forward contracts are worried that they will suffer losses in the future price increase, so they should pay a little money and agree to buy goods from each other at an agreed price in a certain period in the future. So this kind of contract that gives the right to buy is called a call option.
The price paid for this right is "royalty", which is the price of the option.
Therefore, in futures trading, the rights and obligations of both parties are equal and connected, while options separate the rights and obligations in commodity trading, so they have special pricing power.
In this sense, you will find that people who buy options are like buying a right, which can help them lock in risks when prices rise or fall, which is equivalent to insurance. People who sell options earn insurance premiums. Therefore, options have stronger financial attributes than futures and are pure risk management products.
Gambling and Speculation Functions of Options
Because the option deals with the right to buy and sell a commodity, its price will be much lower than the price of its underlying assets. This is equivalent to providing a high leverage for people who buy options, so options are also very easy to be used as tools for gambling and speculation.
take for example
A friend of mine soared the assets of 65,438+million to 2 million by buying options. At that time, my friend took a fancy to a stock in the Hong Kong market, with a share of ten dollars, while a call option was only a few cents. At this time, my friend is faced with two choices: one is to buy 65,438+00,000 shares directly, and the other is to buy 200,000 call options.
These two options are risky, but the stock will not lose everything. Buying options is more like gambling. If you bet correctly, you will make a fortune. If the stock price is not higher than your agreed purchase price before the expiration, this 200,000 option is equivalent to hitting Shui Piao, and 654.38+10,000 yuan will go up in smoke.
So many people think that options and gambling are indeed somewhat similar. At that time, after careful consideration, my friend decided to gamble and bought 200 thousand call options. Fortunately, this stock rose to nearly 10 yuan in more than a month, so the price of this call option also rose above 10 yuan, and his assets suddenly rose from 10 yuan to nearly 2 million yuan.
This kind of counterattack is particularly common in the options market. What is it mainly used for? Because the price of the option you buy is lower than the price of the underlying asset, it is equal to a leverage effect. Once you bet on the price trend, it is easy to get rich.
However, the other side of high income is naturally high risk. By this expiration date, the contract will be invalid. Then the price of the option is equal to 0. If you don't bet on this price trend, you will naturally lose money.
The friend I mentioned, it took about five months to achieve a breakthrough in assets from 65438+ 10,000 to more than 5 million. As a result, he made one or two mistakes and was almost wiped out. Within a year, he was beaten back to his original shape, and similar stories were staged in the options market every day.
Because of this feature, stock options have been criticized a lot. For a long time, many people think that options and gambling are synonymous, and you can make waves in the financial market with very little money, which can cause greater fluctuations.
However, many scholars believe that options provide a flexible short-selling tool, because you can put options when selling, so it will make the negative information in these markets easily enter the price, so it will promote the market to develop in a more effective direction.