First of all, it is to use options to do core risk control (buy insurance) for the original strategy and position. The core of the trading ability is the change of the spot futures position, coupled with the selection of the defensive strategy of the option. Option positions only perform risk control actions when the main position is at risk. For example, one took a long-term euro short order this week, and was worried about short-term interference caused by non-farm payrolls on Friday, so he could buy a one-day euro call option to hedge against the risk of a callback.
Insurance strategies are further divided into simple insurance strategies and black swan strategies.
Simple insurance strategy: According to the position size of the investor's current desired insurance exposure, the size of the option contract is used as the calculation basis, and the average value or mild real/imaginary value of the corresponding position size is bought. Based on my current understanding, I will provide you with some empirical judgments. First of all, because buying out-of-the-box insurance requires less long-term investment, the long-term performance of buying out-of-the-box insurance is better than real-value insurance. Second, during the sharp decline, the volatility rises sharply, and the performance difference between out-of-value and real-value insurance is not as large as imagined. Because the vega part contained in out-of-the-money options is basically 100%, it means that the sensitivity to volatility will be much higher than that of deep-in-the-money options.
The second is to do income enhancement, which is mainly for shocking markets or using the aforementioned pending order technique. Options are great! Comparison of options and pending orders. For example, if you take a long-term euro short order, and your take profit level is at 1.11, then you can roll out the 1.11 euro put option every week to enhance the profit of the euro spot short order.
Summarize the four directions of option use. Play the two main directions (option trading as the main source of profit), earn money in the direction of the underlying price and earn money in the direction of the volatility of the option. Options play two directions of assistance, buying insurance and increasing income.
Key points for using revenue enhancement strategies:
To estimate the volatility of the underlying, you must sell options with a high probability of spot delivery, otherwise you may miss opening or closing a position; opening and closing a position on the left requires the person who builds a position to have sufficient knowledge of the underlying; The enhanced income is more obvious. In actual combat, the time value of deep real-value contracts may be negative. At this time, the volatility rate is 0, and this enhanced strategy is not suitable; involving the delivery of options, investors need to understand the actual delivery process; the strategy of opening positions involves option sellers The margin needs to be kept enough, and the closing strategy can use the covered method.
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