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Trading options in Russia
Today, exchange trade options in Russia is carried out only at one site, special section of the RTS FORTS. Its feature is that the underlying asset of futures options are, so when they say optional Gazprom imply option on Gazprom futures.
Bidder available stock options the major emitters, optional value RTS index, options on gold and silver, as well as on the US dollar.
The most liquid options are options on the RTS, Gazprom, Lukoil and Sberbank, in the rest of the contracts is limited liquidity. Stock options generally expire at the beginning of the second decade of the month, and in recent years, these dates have a significant impact on market dynamics.
Оptions trading mechanism organization in Russia "double counter auction" procedure while issuing orders and transactions similar to the mechanism of the organization of the MICEX trading. In recent years, the options market in Russia is becoming more interesting for private investors. With options, you can keep both the speculative game and open hedge positions in the spot market shares, while investors costs are minimized. In fact, for a Call or Put option buyers, the risk is limited to the size of the premium paid. At the same time, the seller of the option should be accurate, it is potentially unlimited risk, if the option is not covered, i.e. opposite position in the spot market is not open for him. Of course, work with the options requires a certain knowledge, so there are several factors of pricing options, it is the underlying asset price and its variability in recent times. Equally important is the term of the option life, as we approach the expiration or expiration, options are cheaper. By the way, sometimes that their features can earn good money the private investor. Sometimes, before important events it makes sense to buy cheap options Call and Put with near expiry (forming the so-called "straddle"). Typically, for a small premium in this situation the players manage to earn good money. Hedge options makes sense when investors open large positions in the underlying asset, and he does not want to pay a commission to the broker for the change of position.
Calculations are made in rubles FORTS trading session lasts from 10:30 to 23:50, after 18:00 pm on the liquidity of the market is significantly reduced, because at that time the stock market is closed. Recalculation of liabilities or clearing, takes place twice a day, at two o'clock and six o'clock.
For private investors, trading is available through all major retail information system, such for example as Quik. However, even the existing tools help investors solve the main task of multiplying equity.
Option pricing models
In the options market plays an important role mathematics. The most important parameters influencing the premium or option price is the price of the underlying contract, the exercise price (strike price), the time of the contract (expiration), as well as interest rate and volatility. Theoretically, fair prices obtained by the models used in the market professionals. Even though some traders use models which differ from those shown here, most of them will give similar theoretical fair prices.
The price of any financial instrument moves up or down one tick after each transaction. If possible keep track of the value of shares through a considerable amount of time, the traffic on the tick chart will seek to a random character. Mathematically speaking, they will tend to a normal distribution. If you make a transaction at any time by opening the position, and then close it, it will be a profit or a loss, ie, two outcomes possible positive or negative.
A model that uses this premise, called the binomial, it is sometimes also called the Cox-Ross-Rubinstein in honor of its developer. This option price is based on its expected value with the expectation that the player does not receive a profit by buying or selling an option, and holding it up to the deadline in this case we say that option fairly valued. But the most common is the model of Black-Scholz, the model is named after its founders (Fischer Black and Mirena Scholz). It was first described in 1973. The binomial model Black Scholz need to set the number of ticks determine movement up or down before the possible value of the price will be fixed.
Current price at the first step can go in two directions, in the second step in the four directions, the third in sixteen, and so on. The examiner should determine in advance how much to use periods. Formula Black Scholz considered the ultimate form of the binomial model, since allows an infinite number of periods. This little chart will expand indefinitely.
The fair value of the option on the Call Blake Scholz is calculated using a formula that takes into account the price of the underlying asset, the level of risk without rate, the remaining term to expiry, in addition, an important parameter is its volatility, calculated on the basis of the mathematical theory of probability. Under the volatility is taken to mean a high price volatility, increasing the standard deviation of the price of the underlying asset, or the uncertainty of further price movement. For options, a second process essentially corresponds to, i.e. with an increase in uncertainty with the further movement of the price of the underlying asset for options Call and Put premiums should increase, as payment for the additional risk.
Today, the work of the trader in the options market is associated with a constant mathematical analysis. It simplifies the work of existing software. For example, the RTS offers on its website, even a program for the calculation of premiums and quantity options. More complex products are focused on the latest trends in the development of mathematical thought, and offers expertise in statistics and probability theory. However, even after mastering the basics of this subject, any player will receive a distinct advantage, which will help to achieve a successful result on the spot market.
Call Options and Put (call and put)
Options in the recently more and more popular among professional players and private investors. Apart from the traditional strategies of the game on the market, options are widely used for the insurance players in their positions, as well as for the implementation of arbitration, ie, the game on the price dizbalansah. The essence of the option is that one player sells an option, and the other buys it and gets the most right for a specified period of time to either buy or sell at a fixed price a certain amount of the underlying asset of the option seller. Duties of the buyer of the option to make the deal does not arise.
Call option - this option gives the buyer the right to purchase a certain quantity of the underlying asset at a specified price at maturity of the option. Seller Call option gives such a right in exchange for the sale of the option premium, it is sometimes called the option price. Depending on the situation on the market an investor can open a "long" position on the Option Call (buy option), or open a "short" position (sell option). In the case of purchase, the investor acquires the right to buy the tool at the heart of the option at a certain strike price before the day on which the option expires term. The premium paid at the opening of long positions of options Call, is the maximum risk to the owner of the option. At the same time, the maximum gain is not theoretically limited, and depends on how much increase in price of the instrument based on the option relative to the exercise price. When the price tool based Call option is growing - the value of a long position for this option increases, because its owner has the right to buy the instrument at the strike price lower than the current one.
If an investor decides to sell the option Call, he sells the right to buy the tool at the heart of the option at a certain strike price until the end of the trading day on which the term expires option. The maximum loss in this case is not limited, and depends on how the security price at the basis of the option exceeds the strike price. If the price of the instrument at the heart of Call option rises above the exercise price, there is a risk that the buyer of the option wants to exercise its right to purchase the relevant securities.
With the option Put the situation is opposite.
Beginners market participants to better develop positions based on Call option, because in this case, although there is a risk of losing the amount of the premium paid, yet the risk of a limited amount. The seller of the option, the buyer is obliged to sell the asset underlying the option, at a fixed exercise price, and the premium remains only to him.
Endless risk can cost the seller of the option is very expensive, so experts do not recommend not qualified investors to sell options without coverage. If you buy a call option sold by the existing share in the spot market, the risks will be reduced significantly.
Determination of fair option premium the main task of the investor in the derivatives market. It is generally known that the options and have an internal time value…