Over-the-counter options can do the underlying is listed on the Shanghai and Shenzhen exchanges trading more than six months two-financing with R of the stock underlying up to more than two thousand, ST, *ST stocks except. As well as other containing index vanilla, snowball, individual stock snowball, ETF snowball, CSI 500, 1000 all kinds of snowball and commodity vanilla offer.
Individual investors in the institutional quotation subject to different daily, every day need to repeat the quotation. RFQ can start a month, different brokerage firms quote different amounts.
Investing capital OTC individual stock options case
Xiaoming is optimistic about the market performance of Ping An (601318) in the next three months and plans to build a substantial position in the stock with a market capitalization of 10 million yuan. As individuals are currently unable to participate directly in OTC options on individual stocks, he chose to request quotes through the brokerage channel of qualified institutional investors, and learned that Ping An's three-month flat call options cost 5 percent.
Xiaoming only needs to pay 500,000 yuan option fee (10 million yuan * 5%) to get 10 million yuan notional amount of Ping An of China market capitalization.
1. Scenario in which the stock price rises by 20%:
Two months later, Ping An of China's stock price has risen by 20%. Xiaoming believes that the stock price has converged and chooses to instruct the qualified institutional investor to close out the option contract.
At this point, Xiao Ming grossed*** a profit of 2 million yuan (10 million yuan * 20%), for a net gain of 1.5 million yuan (2 million yuan less the 500,000 yuan paid in option premiums). This illustrates a leveraged net return of 3x ($1.5 million/$500,000).
If Ming chooses to invest $500,000 on his own, he can only make a profit of $100,000 ($500,000 * 20%).
2. Scenario in which the stock price falls by 20%:
Three months later, Ping An of China's stock price falls by 20%. With over-the-counter individual stock options, Ming's net gain is $0 (with the option not to exercise), and the cost is an option premium of -500,000 yuan.
If Ming chooses to invest all of his own money using 10 million yuan, the loss is 2 million yuan (10 million yuan * (-20%)).
This case highlights the leverage advantage of OTC individual stock options, which enables investors to earn greater returns in the market while being able to show more flexibility in risk control.
OTC individual stock options participation process:
First step, the inquiry stage
Submit to the specific individual stock options purchase demand, waiting for the brokerage firm to provide the quotation of the option fee. The quotation includes, but is not limited to, elements such as trading hours, the underlying transaction, the direction of the transaction, the price of the transaction, and the volume of the transaction.
Step 2, Deposit Stage
Once the RFQ is successful, the brokerage firm will quote option fees for the specific stock and term. The investor needs to transfer the corresponding option fee to the designated account.
Step 3, Buy Trading Stage
The investor can place a buy trading order by way of market price, limit price or range price. The brokerage firm will reply within 1 day whether the transaction is completed or not, and if the transaction is not completed, the option fee will be refunded to the account.
Step 4, Sell Exercise Stage
The investor can place a trade order to sell exercise by way of market price, limit price or range price. At the end of the sale, the brokerage firm will notify whether the exercise has been successfully reached.
Note that each brokerage firm has a different exercise date, some are t+1, by t+5, you need to ask before placing the order.
Step 5, Settlement Stage
Based on the information of buying and selling closed positions, the brokerage firms will settle the purchased option contracts. The profit portion will reach the account after T+3 days.
The process of placing an order for OTC individual stock options takes some time and is not like online where you can reach a sale or purchase on your own, so the trading model of OTC individual stock options is still primitive.
Which investors are suitable for OTC options on individual stocks?
1. Low-coverage investors: These investors have already invested a lot of money in some specific stocks and the stock prices are stuck at low levels. They are holding on to these stocks, believing that there is an opportunity for a rebound near a key support level. They expect to capitalize on this rally to balance the cost of capital usage, but are concerned about market risk. In this case, using the limited risk and leverage features of options can increase returns by purchasing call options.
2. News analysts: These investors have access to news information and can learn in advance about major positive news such as mergers and acquisitions, capital increases, share transfers, and financial reports of listed companies. They may also track national industrial policies, planning and support documents, and have the ability to predict the rotation of popular sectors. The interest-free and highly leveraged attributes of options allow them to utilize small amounts of money to obtain large returns.
3. Hedging Strategy Users: Investors may have customers in the securities financing business who are concerned about the possible uncertainty of the rebound space of a certain stock price, but are not willing to give up their bearishness altogether. In this case, they can purchase a call option on that stock to pay a premium to hedge the risk. The non-linear nature of risk and reward in options allows investors to lock in risk in advance, while the return potential can be unlimited over the life of the contract.
4. Dark horse stock trackers: These investors may have a specialized trading system and trading rules that allow them to accurately capture the signs of a stock before it breaks out. They are familiar with money flows, volume, technical patterns, and signs that a stock is on the verge of a surge. The leveraged nature of options and limited risk allows them to better realize their trading strategies.
5. Long-term investors: These investors use in-depth analysis to determine the long-term performance of a stock. They may believe that a stock is about to make a significant rally, but are not willing to invest a large amount of cash to wait due to the cost of capital. In this case, purchasing a call option with a reasonable term can be an effective investment at a specific time and price level.