"Are you talking about stocks?" Dong Qiangqiang knew that Duanmu didn't say it was happy just now, and he must have the desire to talk.

"Hehe, it seems you know me." Duanma quickly scratched a large open space on the dining table, and flipped out a dilapidated and heavy laptop from his schoolbag and put it on the table.

"I don't know anyone here, and the people I know are basically not interested in stocks. You are the only one who can talk to you." Duanmu looked a little disappointed, "I think you must communicate more with others about stocks. It is easy to get obsessed with it after working behind closed doors. Although I won't listen to your suggestions, communicating with you will also help me improve my thinking and logic level."

Dong Qiangqiang also opened a bottle of iced Jinbaker, sat on the side of Duanmu, snapped his fingers, and said, "It's late at night, no one disturbs me, let's talk."

Duanmu said while turning on the computer: "From yesterday to now, I have made two important discoveries. First, I have found several very useful technical indicators. Second, I have traded a call option once."

When Duanmu had completed a transaction, Dong Qiangqiang suddenly became interested. When Duanmu mentioned the options yesterday, he had no remaining money, but now he has won the lawsuit, and an unexpected income will be paid soon, which gives him the bargaining chips. "Then tell me first, what's going on with the call options?"

"The option products in Germany do not maintain the same title as English, or are also called option, but optionsschein (Note: the first letter of a German noun must be capitalized), and call options are not called call

option, but kaufopttionsschein. For example, the current stock price of stock a is 60 marks per share. If investors in the market, such as you or me, think that its stock price will rise within a certain period of time, in addition to buying stocks, you can also buy call options for this stock. Generally, option products will set some fixed face parameters, the most important thing is the base price of the option, the validity period, and its corresponding ratio to the stock. Suppose the basic price of the option we choose is 50 marks per share, the validity period is 3 months, and the corresponding ratio between the option and the stock is 1:1, then the selling price of this option is 11.2 mark per share, that is, you have to spend 11.2 mark to buy a call option. Theoretically, the option price of 11.2 mark per share is equal to the intrinsic value of 10 mark per share plus the time value of 1.2 mark per share."

Dong Qiangqiang understood it a little slowly: "Intrinsic value? Time value? What are these?"

"You can understand the intrinsic value as using the current price of stock a to subtract its basic price, that is, 60 marks minus 50 marks equals 10 marks. And the time value can be understood as using the stock price divided by the basic price equals 1.2 marks." Duanmu raised his head and took a sip of ice beer, waved his hand, "But you don't have to worry about these terms. You just need to remember that you spent 11.2 marks to buy the basic price of 50 marks, valid for 3 months, and the corresponding ratio of 1:1 call option is fine, and the current price of the stock corresponding to this option is 60 marks. Do you understand? The sales prices of most options will be clearly marked when you buy it, and you won't make mistakes."

Dong Qiangqiang nodded.

"Okay, after you buy options, there are three possible situations for stocks. The first is up, the second is down, the third is a small rise or a small fall or no change. Let's talk about the first situation first."

Dong Qiangqiang pulled off a napkin, took a brush and wrote down the keywords.

"Suppose a stock a rises by 25 marks per share in a few weeks to 85 marks per share, which is 25 marks divided by 60 marks, which is 41.7%, then the price of the call option will reach 35 marks per share."

Dong Qiangqiang tentatively asked while counting on the napkin: "Is this the price calculated? Use the current price of stock a to 85 mark per share minus the basic price specified by this call option 50 mark per share, and you get 35 mark per share."

"That's right." Duanmu showed a complimentary expression, "You're really quick to react."

"Don't you need to consider the value of time at 85 mark per share?" Dong Qiangqiang said in confusion.

"Generally speaking, the time value is only considered when buying options. Of course, we are now discussing the most basic call options, but there are actually many other options derived from basic options in the market, such as obstacle options, etc.."

"I understand. That is to say, as the option price rose from 11.2 mark per share to 35 mark per share," Dong Qiangqiang said quickly, "the price of this call option has more than tripled, making a profit of 23.80 mark per share, with a profit margin of 212.5%.

"If you have 60 marks in your hand, you can buy a stock. After a few weeks, when it rises to 85 marks, you will make a profit of 25 marks. If we don't consider the tax deduction, your gross profit margin will reach 41.7%. But if you spend all 60 marks and buy 5 call options, then your profit will be..." Duanmu deliberately paused.

"23.8 marks multiplied by 5 is 119 marks." Dong Qiangqiang took a breath, "almost doubled."

Duanmu took another sip of ice beer and looked at Dong Qiangqiang with a smile: "This is the charm of financial leverage."

"But what you are talking about is the ideal situation, right? If the stock price of stock a falls, will leverage not amplify your losses?"

"Suppose that the price of stock a drops by 20 marks a few weeks later and becomes 40 marks per share, and the actual stock price is lower than the basic price of the call option 50 marks, then the call option will have no intrinsic value and the price of the option will also become 0. At this time, all the 11.2 marks you initially invested in to buy the call option will be lost, and your loss will reach 100%. 50 mark is equivalent to the exercise price of the option in your hand. As for the amplification effect of leverage you mentioned, it should belong to financial futures, and there is still a big difference between option products."

"Can you think that as long as the stock price falls below the base price of the option, the option price will be cleared?"

Duanmu nodded: "If this is the case on the exercise date, the option price will definitely be zero."

"What about the third situation? What will happen if you don't rise or fall?"

"If the price of stock a does not change much after a few weeks, for example, 61 marks per share or 59 marks per share. For the call option at this time, its price is basically around 11.2 marks per share. This price is almost the same as the investor's purchase price. The call option at this time neither makes a profit nor loses. However, this happens very rarely, and the stock price will still change a few months later."

"What if the stock price plummeted?" Dong Qiangqiang asked.

"That's similar to the second situation we just mentioned. If the stock price falls below the base price, there will be no price for the option."

Dong Qiangqiang nodded thoughtfully: "Does put options happen to be the opposite of call options? The more the stock falls, the more money the options make?"

"People who can understand each other are suitable for trading such high IQ financial products." Duanmu praised.

"You just said that you have discovered several important technical indicators?" Dong Qiangqiang was a little embarrassed by his praise, and changed the topic, "What is it?"

"Before, I was greatly influenced by my teacher and didn't pay much attention to stock prices. What's more important is to pay attention to a company's business news and financial data to judge the future development trend of stock prices and focus on logical reasoning. But now I think this is too narrow, so I tried to introduce some technical indicators to help me make more accurate judgments on future stock prices."

"Your teacher?" Dong Qiangqiang said suspiciously, "Is there any professor who teaches people to trade stocks in Han Da?"

"No, my teacher is not a professor at Han University," Duanmu smiled. "He is known as the greatest stock speculation master in modern times, Jesse Livermore."

This is the first time Dong Qiangqiang heard of this name. He was 21 years old this year.
Chapter completed!