What is PUT with Fog Core Technology and Moderna Option Operation

As we said before, as option arbitrage enthusiasts, call and put are very important components of it, but we prefer to sell put by comparison.


Why, let's say what is PUT first?


01

About PUT


PUT, also known as put option, is a financial contract.


According to John Hull's book Options, Futures and Other Derivatives, it is defined as follows:

Option products can be divided into two basic types: call option and put option; The holder of call option has the right to buy a certain asset at a certain price at a certain time in the future; The holder of put option has the right to sell an asset at a certain price at a certain time in the future.

In other words, the easiest way to make money in the market is to buy stocks or other assets, wait for their prices to rise, and then sell them for profit.


However, we can also buy options, which do not require you to buy actual stocks. Because an option is a contract, let us decide whether to buy (or sell) the stock now, later, or not at all.


For example:


F took a fancy to a house in Tiantongyuan, Beijing, and the price was 4 million; But you think this house is going to rise, but the owner H feels that the recent house price trend is unclear, but the overall price is not optimistic, but he does not want to reduce the price in the short term, so F made an agreement with the owner H:


In the next three months, the owner H can sell the house to F at any time for 3.4 million yuan. This agreement is the Contract.


The price of this agreement is: Homeowner H should give buyer F 100,000 security deposit, and 100,000 is "option premium", that is, "option premium". Of course, you can understand it as insurance premium. If the price does not follow your expected direction, this premium can protect you from causing huge losses.


So,The house price of 3.4 million is the "exercise price";

And the buyer F is equivalent to selling a homeowner H a put;;

The homeowner H is equivalent to buying a put; Like the buyer F;

Three months is the deadline;

Then, there are roughly the following five situations:


A

When the house price rises to 5.5 million, the owner H will not exercise the right with the buyer F, but will sell the house for 5.5 million.

Then, with the execution price of 3.4 million as the reference value, the homeowner will reap 2.1 million.

Buyer F lost the opportunity to buy a house, but got a deposit of 100,000 yuan.

This behavior is"No right".

5.5 million isImaginary option(Out of the money, OTM). That is, when the current price of the subject matter is higher than the exercise price, it is called the imaginary option of the contract, or outside the weighing price.


B

The house price fell to 2 million, and the homeowner H sold the house to the buyer F for 3.4 million;

Then, with the execution price of 3.4 million as the reference value, the homeowner will reap 1.4 million.

The actual purchase price of Buyer F is 3.3 million (3.4 million-100,000).

This behavior is"Exercise".

2 million isReal option(In the money, ITM), when the current price of the subject matter is lower than the exercise price, the contract is called a real option, orWithin price.


C

When the house price falls to 3.4 million yuan, the owner H still sells the house to the buyer F for 3.4 million yuan, but the actual income of the owner is 3.3 million yuan (3.4 million-100,000 yuan), while the actual price of the buyer F is also 3.3 million yuan.

Then, with the execution price of 3.4 million as the reference value, the homeowner will lose 100,000.

The actual purchase price of Buyer F is 3.3 million (3.4 million-100,000).

3.4 millionEqual option(At the money, ATM), the underlying price of such a contractThe grid is the same as the exercise price, or calledEquivalence.


D

When the house price falls to 3.3 million yuan, the owner H still sells the house to the buyer F for 3.4 million yuan, but the actual income of the owner is 3.3 million yuan (3.4 million-100,000 yuan), while the actual price of the buyer F is also 3.3 million yuan.


Homeowner H and buyer F are lonely in trading.


H

Of course, there will be a more unlucky situation, that is, the house price falls to 2 million, and then continues to fall to 500,000, so this is a great loss for Buyer F, but this is not the worst. If Buyer F buys the house and the house is burned down, then this transaction will lose all its money for F.


Of course, this is an example of buying a house to explain the process of buying and selling PUT. Next, we use an actual case of buying and selling PUT that we have done before and think is also very good.


02


On March 19, 2020,Fog core technology$RLX Technology(RLX)$When the stock price is 19.5,

Considering that the government's regulatory measures on e-cigarettes are about to come out, we are short on Fog Core Technology (RLX) and speculate that the stock price is likely to be hit at that time. We have done the following operations:


First, we bought 12.5 $/share put due on April 16, 2021 at a price of 0.5 $/share.


0.5 $/share is option premium, that is, option fee;

12.5 $/share is the exercise price;


Just four days later, on March 23, the stock price of Fog Core Technology (RLX) was almost halfway down to 10.83, and continued to fall; Corresponding to the decline of its stock price, its put option price has been rising all the way, so we didn't exercise it, but sold the put due on April 16th at a price of 3.2 $/share.


Yes, PUT, as a contract, can be resold.


That is, from March 19 to March 23, we will buy a PUT of Fog Core Technology (RLX), and then sell it after the price of this PUT rises.

The profit of this put in these 4 days is as high as(3.2-0.5) /0.5 = 540%,If it is annualized, it will be even worse.


This example belongs to the example of earning a lot, of course, there are also examples of huge losses:


Sell Moderna$Moderna, Inc.(MRNA)$Put of:


Know our friends know that we are optimisticModerna (MRNA)On October 22, 2021, Moderna (MRNA) shares plunged 3.8% to 324

We bet that its share price won't continue to fall, so we sold 280 put due on November 19, 2021 at a price of 6 per share.

However, on November 5, Moderna (MRNA) reported an adjusted earnings per share of $7.70 in the third quarter, which was lower than Wall Street's expectation of $8.96, so the stock price dropped by 16.6%.


However, on November 15th, four days before the due date, when the stock price was 230.6, we predicted that the stock price of MRNA would not be very friendly in the short term. In order to prevent more losses, we bought back the put we sold before, and spent 48.87 per share.


This put lost (6-48.87) /6=-714.5% in just three weeks, and the loss was as high as seven times.


03

Uncle Viewpoint Time


Compared with buying CALL, the operation of buying PUT or selling PUT is relatively complicated, and the risk is relatively large, especially selling PUT, so it is recommended that everyone operate carefully.


As for why we like to sell PUT, what kind of stock PUT we like to sell, and the advantages and disadvantages of PUT, we will explain in detail in the next article.

# 我的交易策略

Disclaimer: The above content represents only the personal views of the poster and does not constitute investment advice on this platform.

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