1, basic knowledge of options
Let me briefly introduce the basic knowledge of options. The option is very simple, it is an option. The holder, that is, the buyer, has the right to choose to buy or sell a certain amount of basic assets at the time and price stipulated in the contract. If the underlying asset is a stock index, such options are called stock index options.
The option is optional. For example, we often say that options are like insurance. Let me give you a simple example and compare the options with auto insurance.
Auto insurance, once we have a risk accident, we can also choose to let the insurance company pay or not. So is the option. We can choose to buy or sell a certain amount of basic assets at the time and price stipulated in the contract when the contract expires. We can choose to exercise this right or give it up, which is different from stocks and futures.
2. The insurance function of options
The second part tells how options are used as insurance functions through cases.
The derivatives market has different participants. In addition to the stock market, futures market and options market, the more markets there are, the higher the efficiency of risk management and decentralization. There are different participants in the market, some for hedging and some for speculation, and the more effective the risk transfer and diversification will be. An outstanding feature of option is its leverage, which can play an important role when it is used in risk management.
When investors want to buy options at a certain price, they can sell put options at the exercise price. When selling options, investors can buy the target at this price to achieve "low price" and earn patent fees at the same time. When the sold option fails to exercise, investors get a premium, which reduces the purchase cost of the target.
For example, a landlord is worried about falling house prices in the future and wants to sell his house for 5.5 million. Xiao Chen, the only housekeeper, wants to buy the house with only 5 million pounds. At that time, Xiao Chen and the landlord did not negotiate. Xiao Chen signed an agreement with the landlord, and Chen Xiao sold the landlord a right for 50,000 yuan. Three months later, the house price fell below 5 million yuan, and Chen Xiao bought the house for 5 million yuan. If after 3 months, the house price really falls below 5 million, and the landlord exercises his right, Chen Xiao bought the house at the expected price of 5 million and earned a royalty of 50,000 yuan. If the house price is still above 5 million yuan after 3 months, Xiao Chen will earn 50,000 yuan in royalties, which can also be used to subsidize the cost of buying a house.
3. Options can be used as a tool for the price fluctuation of trading targets.
When investors invest in stocks and futures, they can only make profits by judging the direction of price rise and fall; When investing in options, you can also make a profit by judging the fluctuation of the underlying price (such as ups and downs, small ups and downs, no ups and downs).