Now that my country's options are officially launched, in addition to being able to do long and short, and using options, we also have two more trading directions (explained later). Of course, both may produce gains and losses. The popular understanding of options is the market index. Calling means going long, putting means going short, and it is a two-way T+0 transaction. So how to explain the concepts and characteristics of options in a popular way?
1. What are options? How to explain options in layman’s terms?
As the name suggests, options refer to "rights with a time limit".
In other words, you enjoy certain rights within a specified period of time, but if the time limit is exceeded, the rights will expire.
Just like the monthly card and annual card systems implemented by many video websites now.
If you buy a monthly card for January 2023, you can enjoy the ad-free privileges brought by January. Come February, if you don’t buy a monthly card, you will still be advertised.
The essence of an option is a choice.
For the buyer, he can choose to exercise the right within the time limit specified in the contract, or he can choose not to use it, firmly controlling the initiative of the option.
When it is profitable, you choose to exercise the power and make a lot of money; when the market is unfavorable, you do not exercise the power and bear the loss of the option premium.
Just like when we rent a shop to do business, we may make a profit or lose money after it opens. When it does not open, we only lose rent.
For the seller, the highest profit is the option premium, while the loss can be infinite.
When the situation is favorable to the buyer, the buyer chooses to exercise his rights and earn a lot of money.
But the seller also has the opportunity to get these profits, because the seller is the first owner.
Since you didn't get it, it would naturally become a loss. The more the buyer makes, the more the seller loses.
When the buyer does not exercise the power, the option premium is lost. For the seller, it means earning an option premium.
2. How to explain the concept and characteristics of options in a popular way?
Options is a proper term in investment and financial management. People who don’t understand it may think it is very esoteric and mysterious, as if it is very high-level. For those who really understand them, they probably can't fall in love with each other, and they can't hate even if they want to. It's actually very simple. If you get more familiar with it, you'll know.
There was once a very funny joke. People said that they usually only know that when the stock price falls, it is a bad time, and their money will not come out. But they don’t know that when the stock price rises, they will also lose money, and their own money will be lost. It may also happen that under different circumstances, you may not be able to get your money out. In fact, the same is true in options. If you operate it improperly, your money will be trapped and unable to move.
In the options currently officially launched in China, we can do more than short selling. Of course, it is likely to generate gains and losses. Now let me give an example to explain this situation. Xiao Wang bought a stock and sold it for 10 yuan. I'm worried that stock prices will fall, if stock prices can buy insurance.
If there is a demand, there will be a market, and people will meet the demand immediately. Xiao Li will appear out of nowhere. At this time, someone will pat their chest and assure you that in three months, no matter whether the stock market rises or falls, your money will not Loss, I want to buy the stock in your hand at a price of 8 yuan. Signed and signed in black and white, these are timeless and will never change. It doesn’t have to be old, it was done within three months.
Do you now understand the concept and characteristics of options? In fact, if you read more related books, you will understand it easily, but if you want to make more money, you still have to be cautious and don't be led astray by others.
3. How to explain the concept and characteristics of options in a popular way?
Options are a gambling model. You pay a certain fee, determine a certain price and time, and when it expires, you have the right to sell and buy. That is, when it expires and it is in your favor at the agreed price, you exercise the option and you lose. , the right will be exercised, and the loss will be the cost of your transaction. If you win, you win a lot; if you lose, you will get nothing.
This is my sharing of my own experience in making money from options. I hope it will be helpful to you.
1. Be a buyer, not a seller, test the water with a small amount and do a good job in fund management and position control
2. Choose a contract with active trading. Do not choose a deep real value or deep virtual value contract. Choose one with a range of 700-1200 during the day. In volatile market conditions, choose a contract around 1,000-1,200. If you want to hold a position in the swing range for 1-3 days to double the market price, choose a contract with an attachment of 500-700 yuan. It is best to keep the position period no longer than three days. On the first day, you are trapped and increase the position. On the second day, the direction is still wrong. Stop the loss directly. Don’t hold the order. Don’t hold the order. If you hold the order, it will be 0%.
3. When doing intraday trading, take profits in batches and strictly stop losses, and be safe (set a stop loss point when opening a position)
4. Don’t buy a contract with less than one week left before expiration date
5. Go in one direction, don’t do it in both directions, and avoid “slapping” you in the face back and forth.
6. Do not operate with the mentality of buying lows and chasing highs, and do not hold orders.