"You're talking about stocks, right?" Dong Qiangqiang knew that Duanmu didn't say anything happy just now, and he must still have the desire to talk.
"Hey, it seems you understand me." Duanmu quickly opened a large space on the dining table, took out a worn-out and heavy laptop from his schoolbag and placed it on the table.
"I don't know anyone here, and most of the people I know are not interested in stocks. The only one who can talk is you." Duanmu looked a little disappointed, "I think we must communicate more with others about stocks, and do things behind closed doors. It’s easy to get carried away. Although I won’t listen to your advice, communicating with you will help me improve my thinking and logic.”
Dong Qiangqiang also opened a bottle of iced Golden Baker, sat on the side of Duanmu, snapped his fingers and said: "It's quiet at night, no one will disturb you, let's talk."
Duanmu turned on the computer as he spoke: "From yesterday to now, I have made two important discoveries. First, I found several very useful technical indicators. Second, I have already traded a call option."
Hearing that Duanmu had completed a transaction, Dong Qiangqiang suddenly became interested. When Duanmu mentioned the options yesterday, he had no money left, but now that he had won the lawsuit, an unexpected income was about to come in, which gave him the leverage to increase his bets. "Then tell me first, what is the call option?"
"The options products in Germany are not called pt in the same way as in English, but pthe (note: the first letter of the German noun must be capitalized), and the call options are not called all pt, but kafpthe. For example For example, the current share price of stock A is 60 marks per share. If investors in the market, such as you or me, think that its share price will rise within a certain period, then in addition to buying the stock, you can also buy this stock. Stock call options. Generally, option products will set some fixed par parameters. The most important ones are the option’s basic price, validity period, and its corresponding proportion to the stock. Assume that the basic price of the option we selected is 50 marks per share. The validity period is 3 months, and the corresponding ratio of options to stocks is 1:1. Then the sales price of this option is 112 marks per share, which means you have to spend 112 marks to buy a call option. Theoretically, per share The option price of 112 marks is equal to the intrinsic value of 10 marks per share plus the time value of 12 marks per share.”
Dong Qiangqiang was a little slow to understand: "Intrinsic value? Time value? What are these?"
"You can understand the intrinsic value as the current price of stock a minus its underlying price, that is, 60 marks minus 50 marks equals 10 marks. And the time value can be understood as dividing the stock price by the underlying price, which equals 12 marks." Duanmu raised his head and took a sip of cold beer and waved his hand, "But you don't have to worry about these terms for now. You just need to remember that you spent 112 marks to buy a call option with a base price of 50 marks, a validity period of 3 months, and a corresponding ratio of 1:1. Just fine, and the current price of the stock corresponding to this option is 60 marks. Do you understand? The sales price of most options will be clearly marked when you buy it, and you will not get it wrong."
Dong Qiangqiang nodded.
"K, after you buy the option, the stock will have three possible situations. The first is an increase, the second is a decrease, and the third is a small increase or decrease or no change. Let's talk about the first situation first."
Dong Qiangqiang pulled off a napkin, took a brush and wrote down key words.
"Suppose that a few weeks later, the price per share of stock A rises by 25 marks to 85 marks per share. The increase is 25 marks divided by 60 marks, which is 417. Then the price of the call option will reach 35 marks per share. "
Dong Qiangqiang asked tentatively while calculating on his napkin: "Is this how the price is calculated? Subtract the current price of stock A of 85 marks per share from the basic price of the call option of 50 marks per share, and you get 35 marks per share.”
"That's right." Duanmu showed an expression of approval, "You react really quickly."
"Don't we need to consider the time value of 85 marks per share?" Dong Qiangqiang asked doubtfully.
"Generally speaking, time value is only considered when buying options. Of course, we are talking about the most basic call option now, but there are actually many other options derived from basic options in the market, such as barrier options, etc."
"I understand. That is to say, as the option price rose from 112 marks per share to 35 marks per share," Dong Qiangqiang quickly mentally calculated, "the price of this call option more than tripled, with a profit of 2,380 marks per share." , profit margin 2125."
"If you have 60 marks in hand, you can buy a share of stock A. A few weeks later, when it rises to 85 marks, you will make a profit of 25 marks. If we do not consider the tax deduction, your gross profit margin will be Reaching 417. But if you spend all 60 marks and buy 5 call options, then your profit will be..." Duanmu paused deliberately.
"238 marks multiplied by 5 is 119 marks." Dong Qiangqiang took a breath, "almost doubled."
Duanmu took another sip of ice beer and looked at Dong Qiangqiang with a smile: "This is the charm of financial leverage."
"But you're just talking about the best-case scenario, aren't you? If the share price of stock A drops, won't leverage magnify your losses?"
"Assume that the price per share of stock A drops by 20 marks a few weeks later to 40 marks per share, and the actual stock price is lower than the base price of the call option by 50 marks. Then the call option at this time has no intrinsic value. The price has also become 0. At this time, all the 112 marks you originally invested to purchase the call option have been lost, and your loss has reached 100%. 50 marks is equivalent to the exercise price of the option in your hand. .As for the amplification effect of leverage you mentioned, it should belong to financial futures, which is still very different from options products."
"Does that mean that as long as the stock price falls below the base price of the option, the option price will be cleared?"
Duanmu nodded: "If this is the case on the exercise day, the option price will definitely be zero."
"What about the third scenario? What happens if it neither rises nor falls?"
"If the price of stock a does not change much after a few weeks, say 61 marks or 59 marks per share. For the call option at this time, its price is basically still about 112 marks per share. This price and investors The purchase price is almost the same, and there is neither profit nor loss for the call option at this time. However, this rarely happens, and the stock price will still change somewhat after a few months."
"What if the stock price plummets?" Dong Qiangqiang asked.
"That's similar to the second scenario we just talked about. If the stock price falls below the underlying price, the option has no price."
Dong Qiangqiang nodded thoughtfully: "So is a put option just the opposite of a call option? The more the stock falls, the more money the option makes?"
"Anyone who can understand by analogy is suitable for trading such high-intelligence financial products." Duanmu praised.
"Just now you said you discovered several important technical indicators?" Dong Qiangqiang was a little embarrassed by his praise and changed the subject, "What are they?"
“Before, I was greatly influenced by my teacher, and I didn’t pay much attention to the stock price. More importantly, I paid attention to a company’s business news and financial data to judge the future development trend of the stock price. I focused on logical reasoning. . But now I feel that this is too narrow, so I tried to introduce some technical indicators to help me make more accurate judgments on future stock prices."
"Your teacher?" Dong Qiangqiang asked suspiciously, "Does Han University still have professors who teach people to trade stocks?"
"No, my teacher is not a professor from Han University," Duanmu smiled. "He is known as the greatest stock speculator in modern times, Jesse Livermore."
This is the first time Dong Qiangqiang heard this name. He was 21 years old this year.
(Special thanks for this chapter: Shark Wolf’s recommendation vote)
