Complete List of Futures

option

（8） Place of option trading

The option trading place does not need a special place. It can be traded in futures exchanges, special option exchanges and stock exchanges. At present, the largest option exchange in the world is the Chicago Board Options Exchange (CBOE), the largest option exchange in the world; the largest option exchange in Europe is the European Futures and Options Exchange (Eurex), whose predecessor is the German Futures Exchange (DTB) and the Swiss Options&Financial Futures Exchange (SOFFEX); In Asia, South Korea's option market has developed rapidly and its trading scale is huge. At present, it is the best developing country in the world for options. There are options trading in Hong Kong and Taiwan. At home, several exchanges, including Zhengzhou Commodity Exchange, have made preliminary studies on the listing of options in mainland China.

（9） Main trading strategies of options

Spreads trading strategy refers to holding two or more option positions of the same type

(i.e., two or more call options, or two or more put options).

(1) Bull market spread option

The most common type of spread options is bull market spread options (Bu1r reads). This kind of option can be obtained by buying a stock call option with a certain exercise qualification and selling a stock call option with a higher exercise price of the same stock. Both options have the same expiration date. The bull market spread option strategy limits the potential gains of investors when the stock price rises, and it also limits the losses of investors when the stock price falls. This strategy can be expressed as that investors have a call option with the strike price of X1, and give up the rising potential profits by selling a call option with the strike price of X2 (X2>X1). As compensation for giving up the rising potential income, the investor received an option premium with the strike price of X2. There are three different types of bull market spread options:

① The two call options at the beginning of the period are dummy options. At the beginning of the period, one call option is a real option and the other is a dummy option. ③ Both call options at the beginning of the period are real options.

Bull market spread option strategy tends to be conservative.

For example, an investor buys a call option with a strike price of $30 at $3 and sells a call option with a strike price of $35 at $1. If the stock price is higher than $35, the return of this bull market spread option strategy is $5; If the stock price is less than $30, the return of this strategy is 0; If the stock price is between $30 and $35, the return is the difference between the stock price and $30. The cost of the bull market spread option strategy is $3 - $1=$2.

Profit and loss status of stock price range

　　ST≤ 30 -2

　　30 ＜ ST＜ 35 ST－ 32

　　ST≥ 35 3

Bull market spread options can also be established by buying put options with lower strike prices and selling put options with higher strike prices. Different from the bull market spread option established with call option, the investor of the bull market spread option established with put option will get a positive cash flow (ignoring the margin requirement). There is no doubt that the final return of bull market spread options established with put options is lower than that of bull market spread options established with call options.

(2) Bear market spread options

Investors holding bull market spread options expect stock prices to rise. On the contrary. Investors holding bear spreads expect stock prices to fall.

Similar to the bull market spread option, the bear market spread option strategy can be constructed by buying a call option at one strike price and selling a call option at another strike price. However, in the bear market spread option strategy, the strike price of the options purchased is higher than the strike price of the options sold. Similar to the bull market spread option, the bear market spread option simultaneously limits the potential profit when the stock price changes to the favorable direction and the loss when the stock price changes to the unfavorable direction. Bear market spread options can be constructed with put options instead of call options. Investors buy put options with higher strike prices and sell put options with lower strike prices. Holding bear market spread options constructed by put options requires initial investment. In essence, investors buy a put option with a certain strike price and give up some potential profit opportunities by selling a put option with a lower strike price. As compensation for giving up the profit opportunity, the investor received the option premium for selling the option.

(3) Butterfly spread option

Butterfly 1y Spresds strategy consists of three options positions with different strike prices. It can be constructed by buying a call option with a lower strike price X1, buying a call option with a higher strike price X3, and selling two call options with a strike price X2, where X2 is the middle value of X1 and X3. Generally speaking, X2 is very close to the current price of the stock. The profit and loss of this investment strategy is shown in the figure below. If the stock price is kept near X2, the strategy will be profitable; If the stock price fluctuates greatly in any direction, there will be a small loss. Therefore, this is a very appropriate strategy for investors who believe that the stock price is unlikely to fluctuate significantly. This strategy requires a small initial investment.

The following figure shows the gains and losses of disc spread options:

Assume that the current price of a stock is $61. If an investor believes that the stock price is unlikely to change significantly in the next six months. Assume that the market price of six-month call options is as follows:

By buying a call option with a strike price of $55, buying a call option with a strike price of $65, and simultaneously selling two call options with a strike price of $60, investors can construct a butterfly spread option. The cost of constructing this butterfly spread option is $10 ＋ $5 - (2 × $7)=$1. If after six months, the stock price is higher than $65 or lower than $55, the return of the strategy is 0 and the net loss of the investor is $1. If the stock price is between $56 and $64, you can make a profit by using this strategy. When the stock price is $60 after six months, you will get the maximum return of $5. Put options can also be used to construct butterfly spread options. Investors can buy a put option with a lower strike price, buy a put option with a higher strike price, and sell two put options with intermediate strike prices, as shown in the figure above. The butterfly spread option in this example can also be constructed by buying a put option with a strike price of $55, buying a put option with a strike price of $65, and selling two put options with a strike price of $60. If all the above options are European options, butterfly spread options constructed with put options are exactly the same as butterfly spread options constructed with call options. The parity relationship between European call and put options can be used to prove that the initial investment is the same in both cases.

The butterfly spread option can be short by using the operation opposite to the strategy described earlier above. Sell options with strike prices of X1 and X3 and purchase two options with strike prices of X2 (X2 is the median of X1 and X3). If the stock price changes significantly, this strategy will gain certain profits.

(4) Diagonal spread option

Bull market, bear market and calendar spread options can be constructed by buying one call option and selling another. In both bull market and bear market spread options, the execution prices of the two call options are different and the expiration dates are the same. In the case of calendar spread options, the exercise prices of the two call options are the same but the expiration dates are different. In a diagonal spread option, the execution price and maturity date of two call options are different. There are many different kinds of diagonal spread options. The profit and loss status usually changes with the corresponding bull or bear market spread option profit and loss status. Portfolio option Portfolio option is an option trading strategy, which includes call option and put option of the same stock. We will discuss the so-called straddle options, strips options, straps options and broad straddle options

(5) Straddle options

The straddle option strategy is very common in the portfolio option strategy. This strategy can be constructed by simultaneously buying call options and put options of the same stock with the same exercise price, the same maturity date, and its profit and loss status is shown in the following table. The execution price is represented by X. If the stock price is very close to the exercise price on the expiration date of the option, the straddle option will suffer losses. However, if the stock price deviates greatly in any direction, there will be a lot of profits. The profit and loss of the option strategy is calculated.

Profit and loss status of exaggerate options:

When investors expect a significant change in the stock price, but do not know the direction of the change. The straddle option strategy can be applied. Suppose an investor believes that the price of a stock will change significantly in three months, and the current market value of the stock is $69. The investor can construct a straddle option by simultaneously purchasing a call option and a put option with a maturity of three months and an exercise price of $70. Assume that the cost of the call option is $4 and the cost of the put option is $3. If the stock price remains unchanged at $69, it is easy to know that the cost of the strategy is $6 (the initial investment requires $7, at which time the value of the call option expires at 0, and the value of the put option expires at $1). If the stock price is $70 at maturity, there will be a loss of $7 (this is the worst case that can happen). However, if the stock price jumps to $90, the strategy can earn $13; If the stock price falls to $55, you can make a profit of $8, and so on.

If a company is going to be merged and acquired, it seems natural to carry out the straddle option strategy operation of the company's stock. If the merger and acquisition is successful, the stock price can be expected to rise sharply. If the merger and acquisition is not successful, it can be expected that the stock price will drop sharply. In practice, making money is not so easy! When the stock price is expected to jump sharply, the option price of the stock will be far higher than the option price of the same kind of stocks with little change in the expected price.