What Is The Option Market?

The option market is a place for buying and selling options (also called option). Option trading is a business of rights. What a buyer buys is not a physical object, but a right to buy. This right enables him to purchase or sell a certain amount of certain securities to the seller of the option at any time by a predetermined price (usually called the agreement price) at any time within a certain period of time, regardless of the price of the certificate at this time. This "definite period", "agreement price" and the quantity and type of buying and selling securities are stipulated in the option contract before. During the validity period of an option contract, the buyer may exercise or resell such right. If the contract fails, the buyer's option will be invalid.

Options are divided into call option (also called buy option) and put option (also known as put option) two kinds. When a call option is bought, the buyer can purchase a certain amount of securities in advance from the seller at the agreed price to any option at any time during the validity period of the option; if the put option is bought, the buyer can sell the stock at the agreed price at any time within the validity period of the option.

Options trading contracts have uniform standards, and there are uniform provisions on transaction volume, time limit and agreed price. This has created the development of the options market. facilitate Conditions. The term is generally 9 months, and the agreement price is close to or equal to the price of the traded securities, and the option price is less than 30% of the transaction amount. With the development of financial market and diversification of investment, the object of option trading has gradually evolved from initial stock to gold, treasury bills, large negotiable certificates of deposit and other products.

Options trading methods include: (1) set options; (2) balance options; (3) put options and hedging options.

Option trading is different from spot trading. After the spot transaction is completed, the price of the securities to be traded has nothing to do with the seller. The loss or profit arising from price changes is a matter of the buyer. Option trading establishes a relationship between rights and obligations between buyers and sellers, that is, a right that is enjoyed by the buyer individually, and the obligation is separately borne by the seller. Option trading gives the buyer unilateral option. During the validity period of the option contract, when the fluctuation of the security price appears to the buyer's profitable situation, the buyer may buy or sell the option. The contract is the content of the call option, and the seller must purchase the securities at the contract price. Before the expiration of the contract, the buyer can exercise the option at any time before the contract expires, and the delivery date is fixed. The rights and obligations of the option trading contract are divided into the seller and the buyer. They only have the force to the seller, while the futures contract is double Fang Quanli and the obligation is equal. The contract has both coercive power on both sides, and the two parties must carry out the contract price at the delivery date of the futures transaction. transaction 。

The characteristics of the options market are:

(1) trading object is a right. A right to buy or sell securities, and this right has a strong time constraint.

(2) whether the enforcement rights are more flexible. Investors have the option to purchase options, and have the right to stipulate them. term According to market conditions, we decide whether to execute the contract. Investors have no obligation to execute options, give up transactions or transfer options to the third party.

(3) investment risk is small. For investors, the biggest risk of using option investment to buy and sell securities is only the price of the option (premium), and the risk of futures investment will be difficult to control. Therefore, the essence of option investment is to guard against risky investment transactions.