Option fund is an investment fund with options as the main investment object. Option is also a contract, which refers to the right to buy or sell a certain number of certain investment targets at an agreed price within a certain period of time. Here I would like to share some information about the nature of option funds with you, hoping to help you!

What is an option fund?

Option fund refers to an investment fund that focuses on options.

Elements of option fund

Generally speaking, the basic elements of contracts in option fund transactions are:

(1) Buyer: the party that purchases the option.

(2) Seller: the party selling the option.

(3) Royalty: the fee paid by the buyer to the seller, that is, the fee of this right.

The significance of royalty is that the maximum loss that option buyers may suffer is controlled within the amount of royalty; On the contrary, selling an option can get a royalty income quickly, and there is no need to deliver it immediately. But at the same time, it will cause a great market crisis in the price. He must be prepared to meet the buyer's delivery or delivery requirements.

(4) Transaction price: It is the transaction price of forward commodities agreed by the buyer and seller of options, also called delivery price.

(5) Notification date: When the option buyer requests to perform the delivery or delivery contract, it must notify the seller in advance of the scheduled delivery date (that is, the day before the expiration date J) so that the seller can make preparations. This day is the notice day: the notice day is stipulated in the option trading contract, and it is generally between 1 and 12 days.

(6) Maturity date: On this day, the option contract that has been declared in advance must be delivered. If it is not declared, it does not need to be delivered. This day is the end of the validity of the option contract.

Transaction form of option fund

The transaction of option fund can be divided into call option, put option and put option according to the transaction mode; According to the conditions of exercise tools, there are American options and European options. The following are introduced separately.

(1) Call option: Also called long option and call option, that is, you have the right to buy at an agreed price within a specified time. In other words, the buyer of the option has the right to ask the seller to deliver the call option contract within the contract period after buying the option.

(2) Put option: also known as narrow long rights and put options, that is, the right to sell at an agreed price within a specified time. That is, the buyer of options. After purchasing the first option, enjoy the right to exercise the put option during the contract period:

(3) Two-way option: that is, at the same time, the buyer not only bought a call option of a certain commodity (or stock, foreign exchange, etc.). ) and bought a put option at that time. Generally, when the market price fluctuates violently, it is difficult for people to predict its changing direction. In order to avoid losses and crises, they tend to buy two-way options: obviously, the option price of two-way options is higher than that of call options or put options; But at the same time, the profit opportunity of buying two-way options is higher than that of buying the other two options alone.

(4) American option means that the buyer of the option can exercise the option at any time from the validity of the contract to any day within the term.

(5) European option: refers to the right of the buyer of the option to purchase at the agreed price on the expiration date of the contract.

American options and European options are basically the same, but the delivery time is different. The former is more flexible, and the option buyer can exercise the option at the most favorable time within the maturity date; The latter is more cautious, and the option buyer can only ask for delivery on the expiration date of the contract without any advance payment.

Factors affecting the price of option funds

The price of the option fund is the option fee, which is the option price paid by the buyer to the seller. The change of option capital price is influenced by the futures price and delivery price of options, market supply and demand, futures trading cycle, option market price fluctuation, financial market interest rate and exchange rate changes and other factors.

The price of option fund is the premium of option, which consists of intrinsic value and time value of option. The key factors affecting the price of option funds are the change of intrinsic value and the increase or decrease of time value. In addition, there are many direct and indirect factors that affect the option value.

The intrinsic value of (1) option. The intrinsic value of long option is the part where the current futures price of commodity is higher than the delivery price of option; The intrinsic value of short selling option refers to the part where the current futures price of the commodity is lower than the delivery price of the option.

Because of the difference between delivery price and option price, the intrinsic value of option is also different. Therefore, options with different prices can be divided into parity options, valuable options and priceless options. Parity option: when the delivery price of long option or short option plus option fee is equal to the current futures price in the market at that time, the option is a parity option.

Valuable option: when the sum of the delivery price and option fee of a long option is lower than the delivery price of a short option or higher than the current futures price in the market at that time, this futures bar is a valuable option.

Valuable option: when the current futures price in the market is lower than the long option or higher than the sum of the delivery price and option fee of the short option, the option is a valuable option.

The intrinsic value of options reflects the relationship between the delivery price of options and the futures price of commodities.

(2) The external value of options. The external value of options, that is, the time value of options, on the one hand reflects the time crisis during option trading, on the other hand, it also reflects the crisis of market price fluctuation, which can be affected by many factors.

The trading period of options is from the beginning of trading to the last trading day (assuming European options). During this trading period, the change of time value of options is a process from big to small, from there to there. Relatively speaking, the time value of options is directly proportional to the remaining time in the trading period, and the longer the remaining time, the greater the time value. As the expiration date of options approaches, the time value becomes smaller and smaller. When the option expires, it no longer contains any time values.

Because of the different delivery periods, the time value of options living together at a delivery price is different, and then the option price is different. Generally speaking, for the same commodity, the longer the delivery period, the higher the option price.

(3) Other factors affecting the price of option funds First of all, the fluctuation of futures market price has an extremely important impact on the time value of options. The fluctuation of futures market will affect the time value of valuable options, parity options and priceless options, and then affect the price of option funds.

When the futures market price fluctuates greatly, the insurance value and leverage of options are great, and there are also great opportunities for profit. At this time, the option price is relatively high. or vice versa, Dallas to the auditorium

Because the price of option fund is affected by the fluctuation of market price, the fluctuation of market price can effectively adjust and limit the fluctuation of option fund price. Similarly, the price of option fund can also respond to the fluctuation of market price. When the market price fluctuates greatly, the high futures price can restrain this abnormal fluctuation, so that the buyers and sellers of options in the market can plan for each other and avoid robbing or bidding for some options.

Secondly, futures trading as an input, the short-term interest rate in the market has a certain impact on the price of option funds.

In addition, there are some indirect factors that affect the price of option funds. The commercial behavior of some banks, consortia and other organizations will absorb some funds, which will have a boycott effect on option trading, thus affecting the price of option funds; The government's tax policy on futures and options trading will also have an impact on the price of option funds.

At present, Black's first-stage model is widely used in the world as a formula for accurate option pricing. The formula for calculating the call option price is as follows:

In which: the agreed price; R is the interest rate; σ is the fluctuation range of spot price; N(X) is cumulative normal distribution; T is the remaining time before expiration.

This formula was originally used for stock options, and later used for currency options. Based on arbitrage theory, it shows that any combination of option trading and related financial securities can obtain crisis-free profits. The way is to use options and related securities to achieve crisis-free hedging, and then find out the option price or hedging ratio of the result equation.