For many people who have not been exposed to options, options are a lot of knowledge. The last Niuniu class has introduced the commonly used option trading strategies in detail, but there are still many people confused: how to make good use of these strategies in practice? Indeed, it is not difficult to understand the strategy, but how to play options is what investors are most concerned about. This issue of Niuniu class will cite classic cases in history to teach you how to make full use of options trading strategies to successfully play options in the stock market.

First, stocks, options, futures and Wanlun are foolishly confused?

Most investors trade stocks every day, which represents the owner's rights and interests of the company and enjoys many rights and interests in addition to capital gains, such as dividend rights and voting rights. stock price fluctuations are mainly affected by changes in the company's fundamentals and market sentiment, as an unleveraged trading variety, daily trading position risk is the least.

1. Options vs futures

Options and futures are derivatives designed based on stocks, which are mainly used to manage the risk of stock fluctuations. Although both options and futures are standardized contracts, there are significant differences between them:

An option is a tradable contract that gives the buyer the right to buy or sell the assets specified in the agreed quantity contract at an agreed price within the agreed period of time. To put it simply, it is a "right" in which the "future" can choose whether to implement it or not.

Futures refers to the contract in which the buyer and seller agree to settle the subject matter on the exchange at a specific time in the future at the agreed price.

Based on the definition and trading rules, the main differences between the two trading categories can be further divided:

1）The rights and obligations of buyers and sellers are different.. Option is an one-way contract, and the rights and obligations of buyers and sellers are not equal. The buyer has the right to buy or sell the underlying asset at the price stipulated in the contract, while the seller passively performs its obligations. The futures contract is two-way, and both parties have to bear the obligation of delivery when the futures contract expires.

2）Performance bonds are different. In option trading, the biggest loss of the buyer is the royalty that has been paid, and there is no need to pay the performance bond, while the seller is faced with greater risk and may lose unlimited, so he must pay the margin as a guarantee to perform his obligations. In futures trading, both buyers and sellers of futures contracts have to pay a certain proportion of the margin.

3）Margin is calculated in different ways.. Options are non-linear products and margin is not proportional. Futures contract, because it is linear, margin is collected proportionally, often heard Margin Call (margin call) appears in a large number of futures in the wrong direction, when the stock price is contrary to expectations, the margin on the account is insufficient to be covered by the brokerage.

4）The characteristics of profit and loss are different. The buyer's income of the option contract fluctuates with the change of the market price, but the maximum loss is only the royalty of buying the option; the seller's income is only the royalty of selling the option, and the loss is not fixed. In futures trading, both buyers and sellers are faced with unlimited profits and losses.

By comparing the characteristics of the two trading products, it can be found that the trading of options is more flexible and the risk of position is more controllable, especially the buyer of options, which theoretically undertakes limited risks and gains unlimited returns, and options are risk exchange tools. As a double-edged sword, the seller corresponding to the buyer theoretically bears unlimited risks and obtains limited returns. The differences in trading come from their own judgment of the market, the tools are right or wrong, and generally speaking, The risk of the buyer is less than that of the seller. In 2008, many investors sold naked HSBC Holdings PLC call options, only to be knocked out in the fierce market fluctuations.

Therefore, for ordinary investors, before fully understanding the double-edged sword of options, it is suggested that they should only be the option buyer, not the option seller.

2. Option vs

As Hong Kong stock investors love Warrants very much, they slightly explain the difference between Wo Lun and options. Wo Lun, also known as warrants, is very popular in Hong Kong stocks. Wo Lun is issued by investment banks, and special options that must be exercised on the "exercise day". At the same time, Wo Lun's trading terms, maturity date, issuance volume and so on are all designed by Wo Lun, so the total amount of issuance is fixed.

Based on the differences of issuers, Wanlun can only choose the appropriate variety in the exercise price and expiration date provided by the steamer, while the option is a standardized exchange product with a sufficient variety of options. For example, BABA has very rich options with exercise time (14 dates) and exercise price (40 bidirectional prices) for investors to choose from, which is the flexibility advantage of option investment. Through the option filter of FutuNiu Niuniu, it is convenient to query and screen the options of Hong Kong and American stocks.

In addition, the transaction of the ferry is very dependent on the asking price of the wheel. except for the hot varieties, the liquidity is still poor, and the transaction impact cost is often higher in the transaction. Investors can only buy the ferry but not sell it to earn royalties. There are much less strategic choices. The terms of the transaction will also be more complicated, such as the stock exchange ratio (in order to play a number game, making the unit price very low and more attractive) and the last trading day, we need to pay more attention to.

Therefore, from the point of view of the flexibility of investors' decision-making, there is a "period" to select "period", and there is no "period" to choose "nest".

To sum up, in daily transactionsStockIt is an unleveraged product with the lowest risk. The order of investors' exposure to position in leveraged products is as follows:Option buyer, as most investors have stock investment experience, if you want to enter the world of leveraged trading, it is more stable to start from the option buyer in the exploration stage, after all, the maximum loss can be controlled.

Second, how to play rotation options in the stock market

A fresh move, eat all over the sky, moves are not many, in proficiency.

Look at the future, buy options in this direction, this simple strategy, play well is earth-shaking.

In 1993, the Chicago Board options Exchange began to compile the Market volatility Index (Volatility Index,VIX), which uses the implied volatility of S & P 500 options to measure the whole market volatility, which represents the market's expectation of market volatility in the next 30 days-the index is high, indicating that investors expect the future stock price index to fluctuate violently, on the contrary, it means that investors believe that the future stock price volatility tends to moderate.

With years of steady gains in US stocks, the VIX has often fallen below 10 for the first time since 2017.

Where there are anomalies, there are miracles.

Since VIX was as low as 12 at the end of 2016, a mystery buyer has bought VIX index call options for about 50 cents every once in a while. Because the price is always set at 50 cents, the mysterious investor has been given a nickname: "Mr. 50 cents."

"Mr. 50 cents" set the exercise price of VIX at around 20, the long-term average of VIX in US stocks. Once VIX bounces back to its target price before the exercise day, he can make a lot of money by holding futures worth much more than 50 cents at a cost of 50 cents.

At the end of January 2018, Mr. 50 cents continued to move, buying a total of nearly 100000 VIX index call options expiring on March 28 at 54 cents and 48 cents. According to statistics, by this time, his total loss of "buying insurance" has been as high as 200 million US dollars.

I believe many investors will not remember the rest. At the beginning of 2018, trade frictions began to escalate and market sentiment fluctuated violently. At the end of January 2018, within 10 trading days, the volatility of the S & P 500 was as high as 11.76%.

Sharp fluctuations in market sentiment led to a surge in the VIX index, up 400% in a short period of time.

"Mr. 50 cents" waited for more than a year, and finally opened the moon, including the early losses.The market estimates that "Mr. 50 cents" will make a profit of 200 million dollars a night.(see figure below)Of course it's a great deal, with an element of luck and an element of art.If futures were used, it would be estimated that Margin Call would have knocked him out a long time ago. It was the tool characteristics of controllable risk and high leverage of call options that made it possible for him to adhere to his faith for more than a year and make this great trade go down in history.

As a kind of leverage, it always depends on misfortune and good fortune. This classic case also vividly illustrates the power and harm of option as a double-edged sword.Mr. 50 cents had already incurred an actual loss of nearly $200 million before the implementation strategy was proved to make a lot of money.If it is not for sufficient funds and ammunition and firm implementation of the established strategy, it may end up leaving the market at a huge loss and falling before dawn, and the value of the option buyer passes with time. If the bet goes in the wrong direction and the contract period is over, the option will become waste paper. Unlike stocks, time is the biggest enemy of options.

It is precisely because option trading is generally a tool that professional investors will use, resulting in in addition to a very few particularly popular varieties, many of the underlying liquidity is not so good. Once someone makes a big move, the market will quickly find outInterested investors can also explore investment opportunities by observing option trading and position data.。

Going back to the case of "Mr. 50 cents", another big VIX player entered the market in mid-2017. because the trader bet on a large scale, once he participated, the trading volume of VIX options would soar by three times that of the usual trading volume, so it was called"Elephant traders"Of course, he also made a lot of money in the subsequent wild swings.

Their strategy is actuallyContinuous betting through the asymmetry of options that "it looks like a small probability in terms of pricing, but in fact it is expected to be a high probability".To enlarge the return on investment when the black swan appears, so as to get more odds.

Of course, profit and loss are of the same origin, if 2018 is still a calm year of the Ox in another parallel time and space, "Mr. 50 cents" and "Elephant Trader" may be ruthlessly wiped out by the market.

There are many classic option trading cases like this. We can effectively improve our options trading level by analyzing and learning their trading methods and strategies. At the same time, it is also obvious that the advantage of the option buyer is the asymmetry of risk and return, which makes this transaction variety.While enjoying high leverage, the risk is relatively manageableThe disadvantage is that the value passes with time. If you implement an excellent option trading strategy and grasp the timing of the investment, and make good use of this double-edged sword, it may bring a great surprise to your investment.