- □ Introduction of stock options
Options contract gives the holder the right to buy or sell the underlying stock of the contract on or before the expiry date with a pre-determined exercise price. Investors can choose to buy (LONG) or sell (SHORT) stock options.
- □ Buyer
The buyer has the right but not obligated to buy or sell the underlying stock of the contract with the seller on or before the expiry date with a pre-determined exercise price (Strike price)
The party who purchases options contracts needs to afford a monetary cost (called "Premium") in exchange for this right.
- □ Seller
- - The seller has the obligation to buy or sell the underlying stock of the contract with the buyer on or before the expiry date with a pre-determined exercise price (Strike price).
- - The party who sells option contracts can receive premium in exchange for this obligation.
- - The option buyer may choose to exercise or not to exercise that right at or before maturity, but once he/she decides to exercise his/her right, the option seller (Option Writer) must fulfill the contractual obligation. Hence, Option Writer is required to meet the marginal requirement in ensuring the contractual obligation could be fulfilled while the buyer is required to pay the premium only.
- □ Advantages of Stock Options
- 1. Leverage effect
The capital required to invest in stock options represent only a small portion of the amount required for investing in the underlying stock. Leveraged investments allow investors to effectively use their capital and diversify their investments.
- 2. Low transaction costs
- Transaction costs for trading stock options are lower than stock transaction costs.
- 3. Hedge against market risk
Holding long position in put option is a way of hedging against the downside risk of the underlying stock. Investing in stock options contract provides an opportunity to hedge the underlying assets, which protects the value of the investment portfolio and reduces risk more effectively.
- 4. Accommodate market changes
- Stock options can provide investors with profitable opportunities in bull, bear or sideways market.
- □ Profit & Loss Chart
Profit and loss of stock options positions depend on the performances of the underlying stocks. The graph showing the profit and loss for the options positions at maturity is called the expiry day profit and loss chart. Four basic stock options profit and loss charts are as follows:
Potential profits from holding long positions in call options (Long Call) are sourced from the rise in share price of the underlying stock, while the maximum loss is limited to the premium paid.
Potential profits from holding long positions in put options (Long Put) are sourced from the decline in share price of the underlying stock, while the maximum loss is limited to the premium paid.
Profits from holding short positions in call options (Short Call) are sourced from the option premium received at the expense of the risk of loss arising from the rise in share price of the underlying stock.
- Profits from holding short positions in put options (Short Put) are sourced from the option premium received at the expense of the risk of loss arising from the decline in share price of the underlying stock.
- □ Agricultural Products
With our tremendous experience and competitive edge in financial industry, we provide insightful financial updates to producers, manufacturers and investors and assist them to take part in the investment in the products of major global agricultural markets according to their formulated strategies and deployment.
As a broker for the major global Exchanges of agricultural commodity futures, we offer real-time quotations and news. Our clients can get involved in the dealing of agricultural product contracts no matter if the transactions are made by open outcry and e-trading. These products include soybean, soybean oil, bean pulp, palm oil, corn, wheat, white sugar, coffee, cocoa, rubber and cotton, etc.
We are pleased to provide you with comprehensive analyses and real-time updates on agricultural products. The interests of our clients is our top priority and we strive to provide quality brokerage service of in agricultural products. Any enterprises getting involved in the trading of agricultural product futures and options for investment or risk management can always take the advantage of our expertise for effective execution of their transactions.
Corn, wheat, soybean, rough rice and cotton
- □ Metals
We provide direct and proper channels for our clients in the dealing of precious metal derivatives and offer consultative service to a wide range of customers as well. The dealing strategies of our clients are executed through the trading of futures and options at the Hong Kong Stock Exchange.
- Dealing services such as direct, straddle and spread
- Daily market research reports prepared by our research analysts
Crude oil, gasoline, heating oil and natural gas