The difference between futures and options

(1) The subject matter is different

The subject matter of futures transactions is commodities or futures contracts, while the subject matter of options transactions is the right to buy and sell options for commodities or futures contracts.

(2) The symmetry of investor rights and obligations is different

An option is a one-way contract. The buyer of an option obtains the right to perform or non-fulfil the option contract after paying the insurance premium without having to bear obligations; a futures contract is a two-way contract, and both parties of the transaction must bear the obligation to deliver the futures contract when it expires. If you are unwilling to actually deliver, you must hedge within the validity period.

(3) Different performance guarantees

Buyers and sellers of futures contracts must pay a certain amount of performance bond; in options transactions, the buyer does not need to pay performance bond, only the seller is required to pay performance bond, to show that he has the corresponding financial ability to perform the option contract.

(4) Different cash flow

In option transactions, the buyer has to pay the seller an insurance premium, which is the price of the option, which is about 5% to 10% of the price of the traded commodity or futures contract; the option contract can be circulated, and the insurance premium depends on the traded commodity or futures contract Changes in market prices change. In futures trading, both buyers and sellers must pay an initial margin of 5% to 10% of the face value of the futures contract. During the trading period, the loss-making party will also be charged a margin call based on price changes; the profitable party can withdraw excess margin.

(5) Different characteristics of profit and loss

The income of the option buyer fluctuates with changes in market prices and is not fixed, and its loss is limited to the insurance premium of buying the option; the seller’s income is only the insurance premium of selling the option, and its loss is not fixed. Both parties to futures transactions face unlimited profits and endless losses.

(6) The role and effect of hedging are different

The hedging of futures is not a hedging of futures but the physical (spot) of the underlying financial instrument of the futures contract. Since the movement direction of futures and spot prices will eventually converge, hedging can protect the spot price and marginal profit. Effect. Options can also be hedged. For the buyer, even if he waives performance, he will only lose the insurance premium, which preserves the value of his purchase funds; for the seller, either sells the goods at the original price or receives insurance premiums and also preserves the value .

In terms of operation, there is no futures option in China. You can refer to the warrant. It is a simple stock option. The operation of futures is just like the current three domestic trades are mostly varieties. The trading rules of various exchanges in the world are not completely the same, but the principle is the same. You need to see what variety you do, and then learn the rules of this trading house. .

The connection between futures and options

A: Now you have 1 million, and a house sells for 1 million. If you directly use 1 million to buy a house, and both parties pay the money in one hand and the house in the other hand, after the transfer of the ownership, the price rise or fall will have nothing to do with the sale of the house. You think the house price will go up next month. If you buy a house for 1 million, you can now rent out the house to collect rent. This is the stock.

B: You agree with the seller to pay the full house payment next month. Now you will pay a deposit of 100,000 first. The seller said that you will charge a little more because of the property, water and electricity, so you agree that the house price will be 1.005 million after one month. You can sell an extra 5,000 yuan when you sell the house. You think the house price will go up next month, so you book 10 houses with 1 million. This is the futures.

C: If you pay 10,000 yuan, one month later, you will still buy a house at a price of 1 million yuan, but this 10,000 yuan is not included. Those who sell the house can get 1.01 million yuan. You think the house price will go up next month, so you use 1 million to purchase the right to buy 100 units, which is an option. If the house price rises to 1.1 million next month, A only earns 100,000, but B earns 9.5×10=950,000, and C earns 9×100=9 million. The same is 1 million, stocks only earned 10%, futures earned 95%, and options earned 900%!

If the house price drops to 990,000 next month, A only loses 10,000, but B loses 1.5×10=150,000. What about C? C can protect the capital only when the house price rises to 1.01 million, otherwise it will be a loss, and even if the house price remains unchanged, it will be a loss when it expires. If the house price plummets to 900,000 after two days, A loses 100,000, but A can not sell the house and wait for the price to rise. And B lost the deposit at this time. But the seller sold it at 1.005 million. In the case of B, you still get the time to buy it at this price. In order to ensure the seller’s interests, you must add a deposit of 5,000 to the seller. C does not have to buy a house for 1 million, and the seller will not ask you for any more money. If you don’t buy it, you will lose up to 10,000. If the house price continues to plummet to 800,000, B will have to pay an additional 100,000, otherwise the contract will be cancelled and the deposit previously paid will be confiscated and paid to the seller, and you will have to pay 100,000 to the seller. This is the forced liquidation of futures.

To summarize: if you expect the price to change significantly, you have to buy an option. If the price is expected to fluctuate only slightly, buy futures. If you don’t expect any changes in the price, then buy stocks and pay dividends.