There are many option strategies, such as one-leg, straddle, vertical spread, proportional spread and so on, so how can we choose the strategy that best matches the investment view? There are often investors who do not know why the option strategy is not profitable when they are looking in the right direction, which may be because the chosen strategy does not match the point of view. For example, in the simplest bullish view, the one-leg strategy can use both buy bullish and sell bearish operations to match the "bullish" view, but sometimes the target does rise due to the influence of volatility and time dimension. buy bullish but lose money.

In the view of the market, it can be divided into three dimensions: the upper, the middle and the lower, that is, the upper judgment of the pressure level, the middle judgment of the market trend and the lower judgment of the support level. In the dimension of judging the trend, if you think that the underlying market will rise in the future, you can buy call options; if you think that the underlying market will fall in the future, you can buy put options; if you have no opinion, you will not buy any options. In the dimension of judging the support level and the pressure level: if you think there is a pressure level above, you can sell the call option at the exercise price where the upper pressure level is located; if you think there is a support level below, you can sell the put option at the exercise price where the lower support level is located; if you have no opinion, you will not sell any options. When investors have only one view, they can only do one-leg strategy; when there are two or more views, they can combine to build a multi-leg strategy.

[Case one]

There is a market shown in the following chart. After a short rise, the current price of 50ETF is 2.970 yuan. Investors can have multiple views on the future trend of the market: will it continue to rise? Is there a pressure position? Is there a support level?

Rise-buy call (call) options

If you have no opinion on both the upper pressure level and the lower support position, and only have a view that the market is expected to rise in the middle dimension, then you can only buy the strategy of building one-leg call options. In the above quotation, the underlying 50ETF is 2.970 yuan, so investors can buy 50ETF subscription options with an exercise price of 3.0 yuan and pay a royalty of 211 yuan per hand. The asset change direction of the pawnmark in the future is in line with expectations, with 50ETF rising from 2.970 yuan to 3.172 yuan and options from 211yuan / hand to 1645 yuan / hand.

Pressure position-sell call (subscription) option

If the rise and fall of the market is not clear, and there is no view on the support level, but think that the recent rise is more, there is a strong pressure above, it is difficult to continue to rise, at this time can consider building a put call option strategy.

How to choose the right spot to sell and subscribe? First of all, investors need to determine safer pressure points according to their own research and judgment on the market. As a seller's strategy, if there is a serious deviation in the estimation of the point, it may bring great losses. For example, in the above case, the purchase option with an exercise price of 3.1 yuan and 3.2 yuan respectively rose from 25 yuan / hand to 626 yuan / hand at the expiration date, resulting in a loss of 601 yuan. The subscription price of 3.2 yuan dropped from 5 yuan / hand to 0 yuan / hand, with a gain of 5 yuan. Although the call option with lower exercise price can have the opportunity to get more royalty income, it also needs to take more risk. Therefore, in the upward trend, to do the operation of sell call options against the trend, it is more necessary to make accurate research on the market, or consider more virtual contracts to improve the winning rate.

There is support-put put (put) option

If you are not clear about the rise and fall of the market, and do not dare to sell the call option at the pressure level against the trend, but think that the market mood is optimistic and will not fall in the short term, and there is a strong support level below, you can consider building a put option to sell the support level below. Usually, the implied volatility of options is negatively correlated with the underlying market trend, so when the market goes up, the implied volatility tends to decrease or maintain low oscillations. at this time, the construction of seller strategy can obtain the double benefits of the decline of implied volatility and the decline of time value.

Similar to selling and subscription, the selection of selling point is as close as possible to the support level of research and judgment, and the put option with higher exercise price is selected in the safe range to obtain more royalty income. In the above case, if the put option with a strike price of 2.8 yuan and 2.7 yuan respectively is held until maturity, the market continues to rise and does not fall below each support level, at this time, the put option of 2.8 yuan can get a profit of 11 yuan per hand, and the put option of 2.7 yuan can only get a profit of 4 yuan per hand. Therefore, in the upward trend, when we take advantage of the operation of put options, we can consider more flat contracts to obtain greater strategic returns.

Rising and pressure levels-bull market bullish spreads

In the above case, if the investor thinks that the market will continue to rise, but there is a strong pressure level (such as the previous high point) above, and the upside space is limited, the option combination strategy can be built in the middle and upper dimension operation groups at the same time. When investors buy the intermediate-dimensional equal-value call options and sell the upper pressure call options with the same proportion and the same maturity, they can form a bull market to see the price difference strategy.

The bull market spread is essentially a low-cost call option strategy. Selling the call option at the upper pressure level can reduce the royalty expenditure of the strategy, but to a certain extent limits the profit space above. Therefore, in the choice of the exercise price of the seller's position in the bull market, we should not only pursue the minimization of the portfolio royalty, but also take into account the potential upside space of the underlying assets and retain more upside returns as much as possible.

In the above case, we track the performance of different exercise price combinations of bull market spread. in a fast-rising market, the bull market spread strategy has a relative disadvantage compared with one-leg bullish, and only after holding to maturity, there is a small increase in earnings. Mainly in the upward trend, shallow virtual call options are very likely to swallow some of the upside gains, while those who sell deep virtual call options are relatively not cost-effective due to the lack of royalties.

If you think that the market will continue to rise, but the increase is limited, and there is strong pressure above, you can also sell the above call options to form a reserve opening strategy, which is also one of the strategies commonly used by overseas institutions, which can increase the overall income of the strategy by obtaining royalty income in the long-term oscillating or slightly rising market.

Rise and have support-- buy and subscribe + sell and sell

In the above cases, if investors think that the market will continue to rise, the upward space is open, and there is strong support below, they can buy equal-value call options in the intermediate dimension. at the same time, sell the lower support put options to build a price spread composite futures strategy (different exercise prices).

When we build a call option and a put option using the same exercise price, this combination can form a composite futures position, and its risk-return characteristics are basically the same as those of the spot. Compared with the spread composite futures strategy, the Delta absolute value of synthetic futures is larger, so it is more affected by the rising market.

If the underlying asset is long, shorting synthetic futures with the same proportional spread can constitute a neckline strategy, and the profit and loss spread is similar to the bull market spread. When investors already hold 50ETF bulls and think that the market may fall and there is a strong pressure level above, they can increase the combination of buy virtual put options and sell virtual call options on the basis of already held. Among them, the put option provides downside protection for 50ETF, while the sell call option is to obtain the royalty to reduce the cost of the strategy.

Rise has both support and pressure-seagull call option

When the call option is used to match the optimistic view of the future market in the rising market, the put option of the support level and the call option of the pressure level can be sold at the same time to construct the seagull call option strategy. This strategy can be seen as a buy bullish plus a sell wide span, or a bull market plus a sell bearish, or a spread composite futures plus a sell bullish. In a word, the strategy is to give up part of the potential upper income and lower protection in exchange for minimizing the net royalty of the strategy.

Because the middle part of the strategy is to buy call options, so when the market goes up, the strategy only automatically stops the profit, and does not lose money as the market continues to rise. But because the bottom is equivalent to naked put options, when it falls below the support level, the loss of the strategy will increase as the market continues to decline.

The seagull option strategy is more widely used in the industry. generally speaking, the seagull using the call option in the middle dimension is the purchase hedging of the call option in order to avoid the rise in the price of raw materials. in the middle dimension, the seagull put option is used to avoid inventory hedging with downward inventory prices, and to reduce royalty expenditure by selling call options above and below. To hedge raw materials or inventory goods with as little or no cost as possible so as to avoid potential losses caused by sharp price fluctuations in the industrial chain.

[Case two]

There is a period of market, 50ETF is expected to rise slowly, the current price is 3.075 yuan, investors have concluded that the market has a strong support in the position of 3.0yuan, but if the market falls below 2.9yuan in the future, it will fall sharply, then how can you make a profit in both a slow rise and a sharp fall?

Slow rise and reverse rapid decline-- inverse proportional spread strategy

Investors have determined that there is a strong support in the position of 3.0 yuan below, and they can consider selling the put option with a right price of 3.0 yuan. At the same time, they think that in the market trend of the intermediate dimension, falling below 2.9 yuan will stop the upward trend and fall sharply in reverse. Therefore, you can buy a put option with a double exercise price of 2.9 yuan as a lower protection, and this strategy is an inverse proportional spread.

If you do not consider the possible downside risk of reversal and only buy bullish or sell bearish on one leg, you will get more considerable gains when the initial market rises, but once the market reverses and falls, it will not only lose all the floating profits it has already gained, but also sell bearish because it does not have automatic stop-loss characteristics, it will cause a very large loss. In the same case, because the inverse proportional spread strategy holds double buy put options, when the market falls, the two buy put options perform different functions: one is a combination of buy bearish and sell bearish, forming a bull bearish spread, which is regarded as the lower stop protection of selling bearish; the other is used as an one-leg buy bearish to capture potential downside gains. Therefore, when the market rises slowly or turns down, the inverse proportional spread strategy can make a profit.

Because the exercise price of the put option sold against the proportional spread is higher, the right fee is more expensive, and the put option bought is more virtual, so this strategy may not need to pay the royalty or even the income royalty. Take the combination in the case as an example, sell a put option of 3.0 yuan and earn a royalty of 196 yuan, while buy two put options with an exercise price of 2.9 yuan and earn royalty of 45 yuan per hand, so the net royalty income of the strategy is 196-45 × 2 = 106 yuan. Therefore, the inverse proportional spread strategy can be regarded as a cost-free insurance strategy.

[Case three]

There is a market, 50ETF after a sharp decline in the previous wave, entered the finishing stage, to maintain a long range of wide oscillations, pressure level of 2.35 yuan, support level of 2.30 yuan, there is no obvious upward or downward trend. So how can you make a profit from options in an untrending and fluctuating market?

Oscillation market

After determining that the support level and pressure level are not easy to be broken through in the short term, we can make use of the natural advantage of the decline of the seller's harvest time value to construct a double sell strategy of selling support put options and selling pressure level call options.

Since this strategy is a strategy for shorting volatility, it is also necessary not to pay attention to changes in implied volatility before maturity. Generally speaking, in the long-term oscillation arrangement, the implied volatility lacks the event shock and does not have the energy needed to upshoot, so the high probability will steadily decline or low oscillation, which is relatively beneficial to the selling wide-span strategy.

In the above case, we can construct a call option of 2.35 yuan and a put option of 2.30 yuan, earning the royalty of 245 yuan and 130 yuan, respectively. During the period from the end to the expiration of more than a month, the 50ETF still keeps oscillating, and finally closes in the range, and the maximum profit is obtained by selling the wide-span strategy.

[Summary]

In the above combination strategy, generally according to the market point of view, through the research and judgment of the trend, first determine the trend strategy of the central tone, and assist the upper and lower judgment of the support level and pressure level, to enhance the strategy revenue or reduce the strategy construction cost.

The above is an example of the choice of option strategy in the rising market. In the falling market, put options can be given priority to, and similar strategies can also be constructed.

When a combination strategy involving more legs, such as butterfly, eagle, or other complex strategies, can also be constructed in this way, the thinking of strategy construction can be changed to the judgment based on the market. If we simply apply the strategy through tools such as the maturity profit and loss chart, we will encounter many different ways to construct the strategy, but the profit and loss chart is almost equally troublesome, such as neckline strategy, bull market bearish spread strategy and bull market bearish spread strategy. However, based on the decomposition of the market view, we can first determine the tone, such as long target, or buy bullish, or sell bearish, and then through a more detailed point of view, to assist in buying or selling more virtual options. For example, the neckline strategy is to sacrifice the upper income in exchange for lower protection, and the bull market call spread is a low-cost call option constructed to reduce the portfolio royalty. The bull market bearish spread is a low-risk version of put options constructed to reduce the risk of naked selling. Three strategies with the same maturing profit and loss diagrams and bullish views can be constructed from different starting points by using a variety of option strategies. In order to more accurately match the views of investors, so as to maximize returns.