Stock Option Is Not Necessarily Related To Stock Market Volatility.

Looking at the global capital market, the financial derivatives trading venues are mainly in the OTC interbank market.

At present, the domestic financial derivatives market has not started very quickly, and its scale is relatively small.

Yao Jiaren pointed out that the pricing of option price not only refers to the stock price of related subject matter.

In all reference variables, volatility is the most important factor driving the value of options.

The common measure of volatility in financial markets is implied volatility and historical (real) volatility.

Implied volatility is the market volatility estimated by the quantified model of the observable option market price. Its significance lies in the volatility based on the market price, and the historical volatility is measured by the real fluctuation observed in the relevant market in a certain period.

In foreign markets, traders often use implied volatility rather than historical volatility when pricing options and pactions.

In view of the definition of financial derivatives as market gambling behavior, Yao Jiaren said that financial derivatives are a tool to enrich the trading links and optimize capital market pactions, and are important measures to enrich the trading market and build a multi-level capital market.

Options trading participants include market makers and different types of customers. Their judgment of the market is displayed in the trading strategy of operational options.

Generally speaking, the options strategies used by investors include hedging strategy, stop loss strategy, option buying / selling and portfolio strategy.

The stop loss strategy takes advantage of asymmetric directional risk exposure characteristics, cash flow and leverage strategy.

Some common strategies include hedging stocks, package stocks or investment portfolios; selling uplink options for stocks; buying up options (selling down options) in bull markets; buying down options (selling uplink options) in bearish markets; implementing long-term leverage risk exposures with long-term options; using stock options to build stocks or positions and use large index options to modify the size or type of exposure.

In view of the trend of domestic stock options and other financial derivatives market, Yao Jiaren suggested that the option market should insist on serving the real economy and actively promote marketization and internationalization.

He thinks,

The price should be determined by both sides of the market. Only the price of real gold and silver can be traded effectively. The internationalization of financial derivatives will help Chinese enterprises to go out and integrate with the international market faster. Enriching various derivatives tools and carrying out p dimensional risk management will greatly enhance the real economy.

For the market worried

The introduction will increase market volatility, Yao Jiaren stressed that the introduction of option products has nothing to do with stock market volatility.

Market volatility depends on market participants' expectations of the market. Different investors' differentiated risk preference will make the market more diversified. In the long run, the market level will be more stable due to increased risk latitude.

For enterprises, options and other financial derivatives are tools for optimizing financial pactions; for securities firms and information management institutions, options will enrich and optimize the design links of financial products, and provide customers with multiple strategies and risk preferences.

With the expanding capacity of China's financial derivatives market and the increasing diversity of investors' demand, market makers and professional quantitative institutions will usher in new developments.

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Under the new competitive situation, "bigger and stronger" can not cope with the challenge of economic pformation, instead of "doing better and stronger".

The idea of "doing well and doing well" will force financial institutions to comprehensively optimize their trading and risk management capabilities and enhance their core competitiveness in the future.

Yao Jiaren pointed out that at present, many financial institutions regard financial derivatives as blue ocean. If the risk and trading strategies are not grasped at the early stage, it is very easy to lose the opportunity to be eliminated by the market.

Only by taking risks seriously can financial institutions win the competition and usher in a real blue ocean.