The issuance of options
The issuance of options is to short sell options, which is also known as issuing options.
With all the information about options products in the above, some users may ask: Where did the options I bought come from?
Let's take a look at this simple example aforementioned.
On Aug 11, 2019, the price of 1 BTC was 12,000 USDT. Leo believed that BTC would rise to 15,000. USDT in one month.
At the same time, Young believed that the price of BTC, 12,000 USDT, had reached a peak and would fall in one month;
Therefore, Young drew up an option contract as follows:
Contract: On Sep 11, 2019, whoever holds this contract is entitled to buy 1 BTC from me at the price of 12,000 USDT. It costs only 1,000 USDT to become a buyer under this contract.
In this example:
1. Leo entered into the contract with Young and made a payment (Premium) to Young. Young’s income is the proceeds from selling the option;
2. Young received the money from Leo and provided him with a right; Young, like the insurance company, received the "insurance premium" and would not return it;
(3) If, on Sep 11, 2019, the price of BTC rises to 13,000 USDT or higher, Young will sell 1 BTC to Leo at the agreed price, 12,000 USDT, or directly pay back the price difference;
(4) So to issue an option, Young is required to have sufficient balance in his/her account as Insurance fund to cover the cost of contract exercise or price difference.
At CoinEx, any user can choose to be Leo (Traders) or Young (Issuers);
1. CoinEx provides standardized option contracts as well as issuing standards:
2. A certain amount of insurance will be deducted from Young’s balance according to the standard, and a certain number of options contracts can be issued in Young’s account by the platform;
3. After paying the insurance, Young can issue call options and sell them in the market (as Young believes the spot market is bearish); On the other hand, Leo can buy a call option issued by Young (as he believes the spot market is bullish);
4. If Leo buys Young’s call option and the exercise PNL of the option is 100 USDT per contract, then the exercise PNL will be deducted from Young’s insurance and the remainder will be returned to Young.
On CoinEx, you can buy, sell and issue options. All investors have equal trading opportunities.