What is the difference between options and delivery contracts?

Options (Options) is a right that can be exercised at a certain time in the future. After the buyer of the option pays a certain amount of option premium to the seller, he can obtain this right: buy or sell at a certain price in a certain time in the future Out of a certain amount of underlying assets, this is option trading.

Options (Options) is a right that can be exercised at a certain time in the future. After the buyer of the option pays a certain amount of option premium to the seller, he can obtain this right: buy or sell at a certain price in a certain time in the future Out of a certain amount of underlying assets, this is option trading.

Option trading is to trade options as a commodity. Many people may want to say, we are very familiar with delivery contracts and are used to them. Why do we want to do option trading? What's the difference between them?

So, let me tell you about the difference between options and delivery contracts, and what advantages do options have over delivery contracts?

The difference between options and delivery contracts is mainly manifested in three aspects:

1. The rights and obligations of buyers and sellers are different

The delivery contract is a two-way contract. In the transaction, the rights and obligations of the buyer and the seller are equal. Everyone has made an agreement. When the delivery date arrives, the buyer and the seller must conduct the transaction according to the agreement, and no one can default.

Options are one-way contracts, and the rights and obligations assumed by buyers and sellers are unequal. The option buyer, after paying a certain option fee, can obtain the right to buy or sell assets as agreed in the contract. When the exercise date is reached, the option buyer can choose to execute or not to execute. He only enjoys the right. disclaims any obligation. The option seller must bear corresponding obligations.

In this way, options have a very big advantage, that is, they can effectively avoid the situation of "running short" when we trade.

For example, when the price of BTC is low, everyone has such a mentality. On the one hand, they want to wait until the price is lower or even the lowest before buying; It hasn't entered the market yet.

At this time, you can spend a small amount of money to buy BTC options. Once the market really rises sharply, you can use options to buy a corresponding amount of bitcoins at the price before the rise, so as to obtain a large amount of income;

If the market continues to fall, you can also give up the option to exercise, and there will be no loss.

2. Margin collection rules are different

In the transaction of the delivery contract, both the buyer and the seller must pay a certain amount of deposit. In the option contract transaction, the buyer only needs to pay the option fee, and does not need to pay a margin for the position, while the seller needs to pay a certain margin for the position, but can get the option fee first.

In this way, option trading can increase the available funds of buyers and sellers, and everyone can use the margin that is not paid or the option fees earned to do other things, making the use of funds more flexible.

3. Different profit and loss characteristics

The trading modes of options and delivery contracts are different, and naturally the profit and loss characteristics of the two are also different.

In a delivery contract, both buyers and sellers face unlimited profits and losses. If there is no margin call, the position will be forced to close at most and the margin will be lost.

But in the option market, the risk has certain restrictions. For the option buyer, the loss must be limited, because no matter whether you make money after this option, you have to pay a certain option fee first. The biggest loss is the option fee, but if you make a profit, the profit will follow. Favorable changes in the underlying assets will increase, and if the direction is accurate, unlimited profits can be earned;

For the option seller, the profit is limited, because what you earn is only the option premium paid by the buyer, and if you lose money, you have to bear the risk of forced liquidation of the entire margin.

Therefore, as far as the buyer is concerned, the risk of options is lower than that of delivery contracts, but the profit margin is similar.

In addition, when understanding option contracts, there are still a few issues that are easily confused with delivery contracts. Let me briefly explain them here.

1. Different from the delivery contract, the call and put of the option contract are not two directions of one contract, but two contracts. Each contract can be bought or sold. When predicting the direction of future price changes, buying a call option or selling a put option means that the future market will rise, but the two contracts are traded, and the income is different.

2. The leverage of options is different from that of delivery contracts. The leverage of the delivery contract is fixed and is selected by the user. After the selection is made, it is decided how much margin you need to pledge when opening a position of a certain value. The leverage of option contracts is variable and determined by the market price, and users cannot choose by themselves. Therefore, the leverage of option contracts is only provided for users’ reference, and the degree of stimulation of the option contract can be roughly judged by the level of leverage.

3. There are also certain differences between forced liquidation and delivery contracts. If you are buying an option contract, you will not be forced to close the position before the expiration date, but if the market keeps moving in a direction that is not good for you, then the value of your option contract will approach zero infinitely. If the right cannot be exercised on the day of the right, it will be reset to zero. However, if the option contract is sold, there will be a possibility of forced liquidation. Because the seller of the option contract needs to undertake the obligation to perform the option contract when it expires, the trading platform needs to ensure that the assets in its account are sufficient to guarantee the performance of the obligation, and if it is not enough, a forced liquidation will occur.

In general, options can play a variety of purposes in the trading market. It is precisely because of its various advantages that it has become an important trading commodity to help everyone better hedge risks, so that in the digital asset trading market, no It is often unfavorable.