Complete List of Futures

option

（5） Option premium

As mentioned earlier, the option premium is the price of the option contract purchased or sold. For the option buyer, in exchange for the option giving the buyer certain rights, he must pay a premium to the option seller; For the option seller, he has to fulfill the obligation of the option contract by selling the option, for which he receives a premium as remuneration. Since the premium is borne by the buyer, which is the maximum loss amount that the buyer needs to bear in case of the most adverse change, the premium is also called "insurance premium".

（6） Transaction principle of options

To buy a call option with a fixed price, after paying a small premium, you can enjoy the right to buy relevant futures. Once the price really rises, they will exercise the call option to obtain long futures at a low price, and then sell the relevant futures contract at a high price according to the rising price level to gain profit for price difference. After making up for the premium paid, there is still profit. If the price does not rise but falls, the call option can be abandoned or transferred at a low price, and the maximum loss is the premium. The reason why the buyer of the call option buys the call option is that through the analysis of the price changes in the relevant futures market, he believes that the price of the relevant futures market is likely to rise significantly. Therefore, he buys the call option and pays a certain amount of premium. Once the market price really rises by a large margin, he will gain a larger profit by buying futures at a low price, which is greater than the amount of premium paid for his options. He can also sell the option contract at a higher premium price in the market to hedge against profits. If the buyer of the call option does not accurately judge the trend of price changes in the relevant futures market, on the one hand, if the market price only rises slightly, the buyer can perform or hedge to obtain a little profit and make up for the loss of premium expenses; On the other hand, if the market price falls, the buyer will not perform, and its maximum loss is the amount of royalties paid.

（7） Relationship between option trading and futures trading

There are both differences and connections between options trading and futures trading. The links are: first, both are transactions characterized by buying and selling forward standardized contracts; Secondly, in terms of price relationship, the futures market price has an impact on the strike price of option trading contracts and the determination of premium. Generally speaking, the finalized price of option trading is based on the delivery price of forward buying and selling similar commodities determined by the futures contract, and the difference between the two prices is an important basis for determining the premium; Third, futures trading is the basic trading of options trading. Generally, the content is whether to buy or sell a certain number of futures contracts. The more developed futures trading is, the more basic options trading will be. Therefore, the mature futures market and complete rules create conditions for the emergence and development of options trading. The emergence and development of option trading provides more alternative tools for hedgers and speculators to conduct futures trading, thus expanding and enriching the trading content of the futures market; Fourth, futures trading can be long and short, and traders may not necessarily carry out physical delivery. Options trading can also be long and short. The buyer does not have to actually exercise this right, but can also transfer this right as long as it is favorable. The seller may not be obliged to perform, but may cancel the liability of the option buyer by buying the same option before exercising the right; Fifth, since the subject matter of the option is a futures contract, the buyer and seller will get corresponding futures positions when the option is exercised.