Option contract is the abbreviation of option contract, which usually refers to a standardized contract made by an exchange, stipulating that the buyer has the right to buy or sell an agreed number of underlying assets at an agreed price at a certain time in the future.
Option gives the buyer the right to buy or sell the underlying assets at the exercise price (also called exercise price) on the exercise date, and the buyer can choose to exercise or not, so the buyer needs to pay the seller the royalty; The option seller collects the royalty, and at the same time has the obligation to meet the buyer's exercise requirements and sell or buy the corresponding underlying assets. The relationship between rights and obligations of options buyers and sellers is asymmetric.
Standardized option contracts generally include the underlying asset, contract type, contract multiplier, exercise price, expiration date, exercise method and delivery method. Take the IO 1404-C-2200 contract of Shanghai and Shenzhen 300 stock index options simulation trading of China Financial Futures Exchange as an example. The underlying asset of the contract is the Shanghai and Shenzhen 300 Index, the contract type is call option, the exercise price is 2200 index points, the maturity date is the third Friday of April 20 14, the exercise method is European, and the delivery method is cash delivery.
Classification of options
According to different classification standards, options have many different classification methods.
Based on the different types of underlying assets, options can be divided into stock options, stock index options, interest rate options, foreign exchange options and commodity options, among which interest rate options, foreign exchange options and commodity options are mostly futures options.
Options can be divided into European options, American options and Bermuda options according to different exercise methods. European option means that the option buyer must exercise the option on the expiration date; American option means that the option buyer can exercise on any trading day on or before the option expiration date; Bermuda option refers to a series of time that the option buyer can exercise before the option expiration date.
Options can be divided into call options and put options according to different contract types. Call option means that the option buyer has the right to buy the underlying assets at a specific price at a certain time in the future; Put option means that the option buyer has the right to sell the underlying assets at a specific price at a certain time in the future.
Based on the relationship between the underlying asset price and the exercise price, options can be divided into real options, flat options and virtual options. Real option, also known as in-price option, is a call option whose asset price is higher than the exercise price or a put option whose underlying asset price is lower than the exercise price. Flat option, also known as flat option, is a call option and a put option whose asset price is equal to the exercise price. Virtual option, also known as out-of-price option, is a call option whose asset price is lower than the exercise price, or a put option whose underlying asset price is higher than the exercise price.
The history of options
The development of options has a long history, which can be traced back to the 1930s of 17. In the "Tulip Incident" in the Netherlands, tulip growers and traders agreed on the selling price of tulip bulbs to avoid the risk of price fluctuation, and then the tulip option trading market was formed in Amsterdam Trading Center. 1792 Modern options developed after the establishment of new york Stock Exchange. At that time, over-the-counter trading of options was mostly call options and put options were relatively few.
1In April, 973, the Chicago Board Options Exchange (CBOE) was formally established, the call option contract was listed, and the market maker system was introduced, marking the birth of the floor option trading market. 1974 the option clearing company (OCC), a national option clearing institution in the United States, was established. From 65438 to 0977, CBOE and others began to sell option contracts. 1983, CBOE launched the world's first stock index option contract-cboe100 index option (later renamed s&; P 100 index option), which opened a new chapter in the rapid development of the option market. Especially in the last two decades, on-site option trading has maintained a rapid growth trend. According to FIA statistics, by the end of 20 13, there were more than 50 exchanges trading options in the world, covering mature financial markets and major emerging financial markets. There are more and more kinds of transactions in the floor option market. The basic asset categories involve stock indexes, stocks, ETFs, interest rates, exchange rates and so on. It also extends to major futures contracts, including commodity futures, interest rate futures and exchange rate futures.