What Are the Different Types of Stock Option Trading System?
Stock option trading refers to a contract for options trading signed by both parties to a stock transaction. It allows the buyer to buy or sell a certain number of shares to the seller at a specific time and at the price stipulated in the contract. The buyer must pay a certain price in order to obtain this right. Options trading is actually a kind of rights sale. During the validity period specified in the option, the option purchaser can decide whether to buy or sell a certain amount of certain stock from the option seller at the originally agreed price, regardless of how the stock price changes during this period. Therefore, option trading is also called selective trading. [1]
Stock options trading
- Stock option trading is actually a kind of stock right buying and selling, that is, a buyer and seller of a certain stock option can at any time within a specified period, regardless of the rise and fall of the stock market price, to the seller and purchase of its stock Or, buy and sell a certain amount of a certain stock at the price specified in the option contract. There are two types of options: one is
- Variables in the stock options trading market include: the agreed price of the stock to buy or sell, the length of the term, and the option premium.
- The agreed price is closely related to the spot price difference: the larger the positive difference, the lower the option fee; the larger the negative difference, the higher the option fee. The term is also related to the level of the option fee. The longer the term, the higher the option fee.
- The relationship between the annual call options of a company is clarified, and the company's spot on March 1 was $ 3.
- Call Option Variables
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- As can be seen from the above table, the agreement price has increased from US $ 2.6 to US $ 3.5. . Conversely, the larger the negative difference, the richer the profit, and the higher the option fee. This is obvious from the above example. In addition, it can be seen from the table that the longer the period, the greater the profit hope, the higher the option fee. Of course, the fundamental factor affecting the premium is the market supply and demand relationship, and this relationship depends on three specific factors:
- Market prices. When the stock market rises, more people buy call options, for which option sellers raise call options premiums. When the stock market falls, more people buy put options and put option fees will increase.
- Contract time. The closer the stipulated contract time is to the expiration date, the smaller the profit opportunity, the lower the option fee, and the expiration date, the option fee is zero.
- The potential of stocks. This ability refers to the possibility that stock price changes can bring investors even considerable income. Options trading is different from general stock investment. It has obvious speculative properties, and its profit is completely based on stock price fluctuations. Stability in stock prices will bring huge profits to investors, but it is not attractive to option investors. If the stock price fluctuates greatly, there are many potential profit opportunities, and of course, the option fee is also high.
- When trading stock options, they are usually achieved through option trading contracts between buyers and sellers, and this type of contract is a unified standard contract that specifies the necessary conditions for the transaction, such as the validity period, quantity, and type , Expenses, stock prices and other factors.
- The history and development of stock options trading The earliest options trading began in the United States and Europe in the early 8th century. Due to the lack of relevant laws and management, cheating scandals have repeatedly occurred, making it notorious. In the early 20th century, some companies proposed the establishment of an Options Trading Brokers and Dealers Association to provide options investors with intermediary services or sell options, but the transactions at this time were carried out individually, the earliest options OTC transactions. The formal options exchange was established in the 1970s. In April 1973,
- Stock option trading should be considered after the stock index futures are launched. In this situation, stock option (option) trading should be launched, and those stocks with excellent performance and potential for development should be promoted to create stock options to form Chinese stock option trading. The city often establishes a stock option trading market in China. On the one hand, it will help investors to use stock options to control and transfer spot market risks in addition to the use of stock index futures, reducing the risk of fluctuations in stock market and stock index fluctuations. Risk to investors and address
- Stock option trading can be divided into an organized option market (OrganizedExchange), that is, an exchange and an over-the-counter (OTC) market, based on the place where options are traded. Options trading originated in the 6th century and was introduced into the financial market in the 18th century. Spot stocks were used as trading objects, that is, early stock options trading. From then until the 1970s, stock option trading has been relatively fragmented. From the 1970s to the 1980s, stock options have gradually been standardized and developed. After the 1980s, developed countries have begun on their respective exchanges. The large-scale stock options trading has entered a stage of prosperity and development.
- United States*
- Because the US stock option market is the earliest and most mature, taking the US stock option market as an example to analyze the operation, risk and regulatory system of the stock option market is more useful for China to implement stock option trading. The risks of the stock options market mainly include interest rates,
Basic information on stock option trading
- "Stock Options Trading"
- · Publisher: China Finance and Economic Press
- Stock options trading
- · Published: January 2008
- · ISBN: 9787509503140
- · Bar code: 9787509503140
- · Version: 2nd Edition
- · Binding: Paperback
- · Folio: 16
- · Body language: Chinese
- Series title: Shenzhen Stock Exchange Financial Derivatives Series
- · Foreign document name: Options for the stock investor
Introduction to stock option trading
- The development of financial derivatives since the 1970s is one of the most profound and exciting changes in financial history. Although it has been questioned from the beginning, although it has caused huge losses and failures of companies such as Bahrain Bank and even caused shocks in the entire market, financial derivatives have always maintained a strong vitality. Over the past two decades, the average annual growth rate of financial derivatives products has reached 21%, and the transaction volume has doubled approximately every three and a half years. Today, the market for financial derivatives is already big. According to statistics from the Bank for International Settlements, in 2005, the total trading volume of financial futures contracts on the global market reached 3.172 billion, and the financial options reached 3.590 billion. The face value of the contract transactions was US $ 1006 trillion and US $ 403 trillion. In addition to the over-the-counter market, there is a larger and more complex over-the-counter financial derivatives market [3] .
Introduction to Authors of Stock Options Trading
- James B. James B. Bittman is a senior mentoring member of the Options Association and a senior lecturer at the Options Institute of the Chicago Board of Options Exchange. He has been a successful options trader for more than two decades. He has authored books such as "Stock Index Options Trading" and "Trading and Hedging of Agricultural Commodity Futures and Options." He has extensive international influence in the options futures industry. , And co-author of "Options: Basic Concepts and Trading Strategies".
Stock Options Translator Profile
- Jianyu Chen, Bachelor of Southwest University, Master of Sichuan University, PhD of Southwestern University of Finance and Economics, Doctor of Economics (Finance) from Nagoya University, Japan, currently works at the Shenzhen Stock Exchange Comprehensive Research Institute and Derivatives Working Group. He has published about 50 papers in academic journals at home and abroad, and has authored "Stock Options: Contract Design and Operation Conception", "Stock Futures: Scheme Design and Operation Conception" (co-author) and so on.
- Yanchao Yu, PhD in Management from Tianjin University, Postdoctoral Fellow at Tsinghua University and Shenzhen Stock Exchange, currently works at the Shenzhen Stock Exchange Comprehensive Research Institute and Derivatives Working Group. He has published dozens of academic papers in the fields of finance and management. Stock Index Options: Contract Design and Operation Mode.
- Xing Jingping, PhD in Management from Southwestern University of Finance and Economics, Postdoctoral Fellow of Shenzhen Stock Exchange, currently works in the Derivatives Working Group of Shenzhen Stock Exchange. He has published dozens of financial papers in academic journals. Stock Index Futures: Scheme Design and Operation Analysis.
- Sun Peiyuan, PhD in Management, Shanghai Jiaotong University, postdoctoral, currently works in the Shenzhen Stock Exchange Derivatives Working Group and GEM Working Group. He has published dozens of academic papers in the fields of finance, economics and mathematics. Structure: Theory and Chinese Experience (co-authored), Financial Mathematics and Analytical Technology (co-authored), and Options: Application and Supervision (co-authored).
Stock Options Trading Book Editor
- Introduction of the editor:
- Zhang Yujun, born in Sichuan in 1963, holds a bachelor's degree in economics from Southwestern University of Finance and Economics, a master's degree in economics from the Institute of Finance of the People's Bank of China, a doctorate in economics from Peking University, a doctorate in law from Renmin University of China, and a member of the Standing Committee of the Fourth Shenzhen Municipal People's Congress. Since 1988, he has worked for the People's Bank of China Headquarters, the Securities Commission of the State Council, the China Securities Regulatory Commission, and the Shenzhen Securities Regulatory Office. Since October 2000, he has been the general manager of the Shenzhen Stock Exchange. Adjunct professors at Renmin University of China, Nankai University, University of International Business and Economics, and Sun Yat-sen University. His major works include "U.S. Securities Legislation and Management" (1993), "A Institutional Analysis of China's Securities Market Development" (1998), "National Capital Market Strategy in Competition" (2003), and "China's Securities Market Reform and Development in the Transition Period." (2004), "Thinking about Frontier Issues in the Capital Market during the Transition Period" (2005), "Research on the Legal System of Investor Protection" (2006).
- Introduction of Deputy Editor:
- Zhou Ming, graduated from Jilin University in 1984, has successively served as director of the State Planning Commission, deputy director of the issuance supervision department of the China Securities Regulatory Commission, and deputy director of the Shenzhen Securities Regulatory Bureau of the China Securities Regulatory Commission. Since 2004, he has been the Deputy General Manager of Shenzhen Stock Exchange.
Stock Options Trading Book Catalog
- Foreword
- Thanks
- Introduction
- Part I Options Basis
- Chapter 1 Options Glossary
- Chapter 2 How Options Work
- Chapter 3 Why Options Are Valuable
- Chapter 4 Option Price Behavior
- Part II Basic Investment Strategy
- Chapter 5 Buying Call Options-An Investor's Approach
- Chapter 6 Protected Sell Options
- Chapter 7 Adjusting Protected Sale Options
- Chapter 8 Paired Put Options, Protected Put Options, and Collar Strategies
- Chapter 9 Selling Put Options
- Chapter 10 Multiple Applications of LEAPS
- Part III Trading Strategy
- Chapter 11 Op-Eval4 Software Operation
- Chapter 12 Options Trading
- Chapter 13 Vertical Arbitrage Trading
- Chapter 14 Straddle and Lexic Combinations
- Part IV Advanced Topics
- Chapter 15 Ratio Arbitrage
- Chapter 16 Protected Combinations-Long and Short
- Chapter 17 Cash Settled Index Options and ETF Options
- Part V Investment and Trading Psychology
- Chapter 18. The Difference Between Option Investment and Trading
- Chapter 19: Getting Started
- Chapter 20 Learning to Trade
- the term
- postscript