The trading concept of individual stock options:

After paying a certain proportion of the option fee, investors have the right to buy stocks that exceed the option fee by several times to dozens of times. The time period Generally within 1-6 months.

After making a profit, investors can choose to exercise the option and earn profits.

If there is a loss, the investor can give up exercising the option, and the investor’s biggest loss is only the option fee.

Purchasing stocks through individual stock options can bring risk hedging to investors:

1. Provide insurance for the underlying assets held

When investors If you hold spot stocks and have already made book profits, but are not optimistic about the market outlook, and want to avoid the risk of losses caused by falling stock prices, you can buy call options as insurance without worrying about selling your holdings too early or too late. of spot stocks. For example, if an investor buys and holds a stock at a price of 8 yuan per share, when the investor judges that the stock price may fall, he can buy a put option with an exercise price of 10 yuan. If the stock price continues to rise, investors can enjoy the gains from the stock increase. If the stock price falls below 10 yuan, investors can exercise the option and still sell at 10 yuan.

Therefore, the above put option is like an insurance policy for investors, and the premium paid by the investor is equivalent to the premium paid. In the same way, when investors are uncertain about the market trend, they can first buy call options to avoid the risk of shortfall, which is equivalent to buying insurance for the cash in hand

2. Reduce the cost of buying stocks< /p>

Investors can sell put options with a lower exercise price to lock in a lower purchase price for the stock (that is, the exercise price is equal to or close to the price at which they want to buy the stock).

If the stock price is above the exercise price at expiration, the option will generally not be exercised, and investors can earn the premium from selling the option. If the stock price is below the exercise price on the expiration date and the option is exercised, investors can buy the specified stock at the originally locked exercise price, and the actual cost will be reduced due to the premium income.

3. Enhance stock holding returns by selling call options

When investors hold stocks, if they expect the stock price to rise less likely at expiration, they can sell the option with a higher exercise price. High premium income from call options enhances stockholding returns. If the stock price does not rise at expiration, the option will generally not be exercised, and the investor will earn premium income: If the stock price rises significantly on the expiration date, exceeding the exercise price, the call option sold will be exercised, and the investor will earn premium income. Sell ??the stocks you hold at a higher exercise price

4. Through combination strategy trading, form different risk and return combinations

Benefit from the flexible portfolio investment of options Strategy, investors can form different risk and return combinations according to various market conditions through a diversified combination of call options and put options with different exercise prices or expiration dates. Investors can have an in-depth understanding of the application of specific strategies

5. Conduct leveraged long or short directional transactions

For example, investors are bullish on the market, or when investing If investors need to observe for a period of time before making a decision to buy a certain stock, and at the same time do not want to go short, they can buy call options.

Investors use smaller investments to pay premiums, lock in purchase prices, or obtain amplified returns and risks.