Listed options are a type of financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specific date. Options are listed on exchanges and traded by professional, institutional, and retail investors.
Several listed options are available on the exchange-traded funds (ETFs) and stocks of companies in the Hang Seng Index (HSI).
The Hong Kong Exchange (HKEX) offers two types of contracts: call options and put options. A call option permits the holder the right to buy an underlying asset at a specified price on or before a specific date. A put option permits the holder the right to sell an underlying asset at a specified price on or before a specific date.
Options are a popular investment tool for a variety of reasons. You can use them to speculate on a market’s direction, hedge against risk, or generate income. Options a flexible and can be customized to suit the needs of any investor.
1. Decide what type of option you want to trade
The first thing to do when trading options is to decide what type of option you want to trade. There are two types of options: call options and put options. Call options give the holder the right to buy an underlying asset at a specified price, while put options give the holder the right to sell an underlying asset at a specified price.
2. Choose an ETF that tracks the index you want to trade
To trade an index option, you must choose an ETF that tracks the index you want to trade. For example, if you want to trade the Hang Seng Index (HSI)options, you must choose an ETF that tracks the HSI.
3. Select a broker
Once you have decided what type of option you want to trade and which ETF you want to use, you will need to select a broker. Several brokers offer online trading in Hong Kong. Compare fees, features, and reviews before selecting a broker.
4. Open an account and fund it
You must open an account with your chosen broker and fund it. You will need to deposit enough money to cover the cost of your trade. For example, if you want to buy one call option contract on the Hang Seng Index ETF at a strike price of HK$25, you will need HK$2,500 in your account (100 x HK$25).
5. Place your order
Now you can place your order. You will need to specify the type of option, the ETF you want to use, the strike price, and the expiry date. Your broker will then execute your trade.
6. Monitor your position
After your trade has been executed, you will need to monitor your position. Make sure to keep an eye on the underlying asset and be aware of any changes in the market. You may need to adjust your position or close it out if the market moves against you.
What are the benefits of trading listed options in Hong Kong?
Options offer a high degree of flexibility
Options offer a high degree of flexibility and can be customized to suit the needs of any investor. For example, you can use options to speculate on the direction of a market, hedge against risk, or generate income.
Options provide exposure to the global markets
Hong Kong is home to two major stock exchanges: the Hong Kong Stock Exchange (HKEX) and the Exchange Fund (EF). HKEX offers trading in various indices, including index, equity, and currency options.
The EF is a government-sponsored investment fund that manages Hong Kong’s foreign exchange reserves and invests in global markets. The EF does not offer direct options trading but does offer products that track significant indexes and provide exposure to the options market.
You can trade options online
Options can be traded online, through a broker, or on various online platforms, meaning investors can trade options from the comfort of their own homes. All you need is an account with a real broker. When you open a trading account with a broker, he is the link and intermediary between you and the stock exchange.
It is true that trading stocks online can be very profitable, but it can also be very disastrous (for your money) if you don’t have the right guidelines. To trade stocks effectively you need to understand the potential risks and opportunities associated with financial and capital markets.
Therefore, it is desirable and even necessary to be as well informed as possible about all the details before investing your money and it is too late. Read the news on this topic, review the technical forms, and think about why you should choose a particular broker. Here you can read more about it.
It is true that those who do not take risks do not profit. However, if you are a beginner, you can simulate trading without investing real money. This can be a good exercise and an indicator of whether you are on the right track.
You need a plan
In order to succeed, it is important to make a long-term and short-term plan that actually outlines the strategy by which you will go through the “storms” of online commerce. By this we mean mostly your finances, ie the amount you are willing to invest. For starters, it’s best to start with a small investment and remember – you only enter as much as you are willing to lose.
Choosing a strategy
The trader’s trading strategy helps to analyze the share price or fundamental information about the company in the hope that with the help of the obtained information they will be able to predict the price movement. There are various ways to analyze, but they most often fall into one of these two categories.
So, it is fundamental and technical analysis
Trading is the opposite of long-term investing. The investor often has more conservative goals and is less active, and expects the investor to pay him dividends or increase his capital. It is important to compare the time frame used for trading and investment. To be specific, trading uses short time frames, most often days, but these can be weeks!