Basic trading strategy of gold options

1. When do you buy call options? A. investors think that the price of gold will rise (and will rise sharply); B. Unwilling to invest all the capital of gold, hoping to improve the efficiency of the use of funds; C. If the price changes in the opposite direction, control the loss when the judgment is wrong within a certain range (option fee). Buying call option is one of the most basic trading strategies in option trading. When the price of gold rises above the discount price of options (agreed price plus option fee and transaction cost), the possibility of profit is infinite. Otherwise, investors can give up exercising options, and the biggest loss is only the option fee. Although BOC's gold option is a European option that can only be exercised on the maturity date, the price of the option will fluctuate with the price change on the maturity date, and investors can sell the option at any time. Figure 1: Reference quotation of China Bank's gold option treasure on the afternoon of June 65438+February1,2006. Suppose an investor buys a 1100 ounce gold call option on the afternoon of June 65438+February, and the required option fee is 865438+. That is, the bullish currency is XAU), and the agreed price is calculated at the spot gold price of 624.00 US dollars at that time, then the investor's profit and loss changes can be illustrated by Figure 2. The vertical axis represents the profit or loss of the call option, above 0 represents the profit and below 0 represents the loss; The horizontal axis represents the spot gold price on the maturity date. When the gold price exceeds the agreed price on the maturity date (that is, the gold price moves to the right from the point equal to $624 on the horizontal axis), the option profit and loss line begins to rise. If the maturity price is $ 632. 12, the expected annualized income of investors exercising options is $8 12, which just offsets the previous option fee of $8 12, and the overall profit and loss is zero. If the price of gold exceeds $632.65438 +02, this option transaction will start to make a profit. The greater the price increase, the more profit it will make. Suppose investors choose to exercise options at the market price of $650 on June 5438+February 18, that is, they buy 100 ounces of gold at the agreed price of $624.00 and sell it to the bank at the current price of $650, with a profit of $2,600. After deducting the option fee of $865,438, the overall profit of option trading is $65,438. The investor's initial investment is $865,438+02, the income after the gold price rises by $26 is $65,438+0788, and the expected annualized expected rate of return is 65,438+020%. Figure 2: Profit and loss analysis of buying gold call options If the gold price does not rise as we expected, but is lower than $624 on the maturity date, then the biggest loss for investors is the option fee of $8 12 regardless of whether the price is $620 or $400 at that time. It can be seen that the loss of buying call options is limited and predictable, while the profit is infinite and quite unpredictable in theory. 2, buy put options Through the analysis of buying call options, we should easily understand the purpose of buying put options. If investors think that the price of gold will fall (and will fall sharply) and want to control the loss in the case of misjudgment within a certain range (option fee), then they can buy put options. Most domestic gold investment products lack a short-selling mechanism, so BOC gold options can effectively help investors make profits through the decline in gold prices. Suppose an investor buys 1 1 in the afternoon of 65438+February, and the required option fee is $703 (see figure 1 line 6, that is, the bullish currency is USD). The agreed price is calculated at the spot gold price of $624.00 at that time, and the profit and loss changes of investors can be shown in Figure 3. If the gold price on the maturity date is lower than $624, that is, the price moves to the left from the place equal to $624 on the horizontal axis, then the option profit and loss line begins to rise. When the exercise price is $665438 +06.97, the option itself can make a profit of $703, which just offsets the previous premium of $703. If the price is lower than $665,438+06.97, the option trading will start to make overall profit. Assuming that the gold price falls to $600 on the maturity date, the expected annualized expected return when investors exercise put options is (624-600) ×100 = $2,400, and after deducting the option fee of $703, the overall profit is 1697. In this case, the investor's initial investment is $703, the return after the gold price drops by $24 is 1.697, and the expected annualized expected rate of return is 1.4 1%. Figure 3: Profit and loss analysis of buying gold put options If the gold price does not fall as we expected, but is higher than $624 on the maturity date, then the biggest loss for investors is the option fee of $703 regardless of whether the price is $630 or $700 at that time. It can be seen that the loss of buying put options is limited and predictable, and the profit may be high, but it is also limited (because the price of gold cannot fall to zero, but considering the capital amplification ratio of options, we can think that the profit is infinite to some extent).