1. The essence of options is “financial insurance”
Imagine you just bought a new car, and the first thing you do is buy insurance - you pay 5,000 yuan a year, and if you get into a car accident, the insurance company will pay for the repairs. Options are the "accident insurance" of the capital market:
Buying call options = adding risk of skyrocketing prices to your stock holdings (to prevent you from missing out)
Buying put options = adding “crash risk” to your stock positions (to prevent being stuck)
Premium = Insurance Premium (Maximum loss capped)
Strike price = claim trigger line (such as the "total loss standard" in auto insurance)
Even Buffett said: "Options are essentially insurance contracts." However, while the old man publicly dissed options, he collected billions of dollars in premiums by selling S&P 500 put options - the law of true fragrance is never absent!
2. Analysis of three practical scenarios
Scenario 1: Farmer Wang’s “Price Protection Shield” When planting corn in March, Wang was worried that the price would plummet when harvesting in September. So he spent 20,000 yuan to buy a put option that “sold at 2,000 yuan/ton in September”:
If the September corn price drops to 1,800 yuan: exercise the right to sell at 2,000 yuan to offset the spot loss
If corn price rises to 2,200 yuan in September: give up the right and sell directly at a high price in the spot market. Effect: Lose 20,000 yuan of premium at most, but avoid the risk of price decline.
Scenario 2: Airline fuel cost lock-in An airline company expects to purchase 10,000 tons of aviation fuel in half a year, and the current oil price is 5,000 yuan/ton. They buy a "5,000 yuan call option" + sell a "5,500 yuan put option":
Oil price rises to 6,000 yuan: Use call options to purchase at a low price and save 10 million
Oil price drops to 4,500 yuan: Spot purchase saves 5 million yuan, but the put option sold needs to be compensated 5 million yuan, which is just the hedging effect: fuel costs are strictly controlled in the range of 4,500-5,500 yuan
Scenario 3: Xiaomei, a stockholder, uses her “anti-explosion magic weapon”. Xiaomei holds 100,000 yuan worth of Moutai shares and is afraid of black swan events. She spends 500 yuan a month to buy put options:
If Moutai plummets 30%, option profits of 30,000 will offset stock losses
If Moutai rises steadily: only a small amount of "insurance premium" will be lost Effect: It is equivalent to spending 6,000 yuan a year to buy accident insurance for the stock account
3. The Nine Swords of Option Risk Management
Type 1: Insurance Policy Model
Applicable people: Investors who hold spot for a long time
Operation: Buy out-of-the-money put options (equivalent to 5% of the insured amount of accident insurance)
Cost: Usually 1-3% of the market value of holdings per year
Second type: spare tire strategy
Applicable scenarios: Want to buy at the bottom but afraid of being trapped
Operation: Sell out-of-the-money put options (e.g. sell a put option with an exercise price of 90 yuan when the current price is 100 yuan)
Effect: Either receive the goods at a low price or earn the premium for free
The third method: profit enhancement
Applicable market conditions: volatile market
Operation: Covered call opening (holding stocks + selling call options)
Case: Holding Moutai and selling 2,000 yuan call options at the same time, earning an extra 1% profit every month
Special attention:
Don’t buy “insurance” as “gambling” – keep your position within 5%
Beware of "insurance expiration" - remember to check option expiration dates
Don’t be tempted by “free insurance” - selling options may seem like collecting premiums, but in fact you are taking on unlimited risk
IV. Lessons from blood and tears: the pitfalls we encountered in those years
Case 1: China Aviation Oil's huge loss in options In 2004, Chen Jiulin sold crude oil call options, betting that the oil price would not exceed $40. As a result, the oil price soared to $55, resulting in a loss of $550 million. Lesson: Selling options is like running an insurance company. If you can't handle the claims, you will go bankrupt!
Case 2: Investors in the 2020 crude oil treasure margin call event thought they were buying "crude oil financial management", but in fact they were futures contracts. If they had bought put options at the time, they would have lost at most the principal and would not owe the bank. Lesson: Don't touch derivatives if you don't understand them, buy insurance first!
Case 3: US retail investors fight against GME institutions, which buy a large number of out-of-the-money call options, pushing the stock price up 10 times. Enlightenment: Options can not only hedge risks, but also become a weapon for short squeeze!
5. Your Options Safe Configuration Guide
Beginner's package: Buy put options at 3% of the position value
Advanced combination: Covered call opening + protective put constitutes "double insurance"
Experts’ approach: Betting on financial report fluctuations with straddle combinations
remember:
Never use option leverage exceeding 2 times the principal
Before every transaction, ask yourself: Is this buying insurance or a gamble?
Check the expiration date of the "policy" regularly to prevent the protection from suddenly expiring
6. Next Issue Preview
Comparative Observation of Chinese and American Options Markets
After-class task: Open the trading software to check the price of 50ETF put options, calculate the annualized cost of insuring your positions (premium × 12 ÷ position market value), and leave a message to share your findings!
