Report Overview - Report Title: How to Construct Option Trading Strategies - Option Strategy Details (Part Two) [1] - Report Date: July 25, 2025 [1] - Analysts: Cheng Bingzhe, Zhang Shuai [2] Core Viewpoint - The real charm of options lies in constructing diverse trading strategies through combining different contracts, precisely expressing specific views on the market, and controlling risks and returns within a preset range [3][9]. - All option strategies are based on processing basic option positions to adapt to different market environments and manage risks. Understanding the option structure behind these strategies is the key to identifying their real risk and return sources [3][17]. Industry Investment Rating - Not mentioned in the report. Summary by Directory 1. On - site Option Strategies - Single - leg trading, which involves directly buying or selling call or put options, is the cornerstone of complex trading. Buying call options is suitable for bullish markets with limited cost and unlimited theoretical returns, while buying put options is for bearish markets. Selling options aims to earn stable cash flow but bears the risk of exercise. The covered call strategy, which combines with the underlying asset, is a relatively stable return - enhancement strategy [10]. - When investors have more refined views on the market, they can use combination strategies. Directional combinations like bull spreads are suitable for moderately bullish markets, and bear spreads for moderately bearish markets. Butterfly spreads are used for markets with narrow - range fluctuations. Volatility strategies such as straddle combinations are for markets with significant but uncertain - direction fluctuations. Calendar spreads use the time - value difference between different - maturity contracts and are suitable for stable or moderately volatile markets [11][13] 2. Off - site Option Strategies - Off - site options are customized agreements between financial institutions and customers to meet special risk - management needs. The "Snowball" product is well - known. Investors can get high coupons in a moderately rising or volatile market but face principal - loss risks in a sharp - falling market. The Dynamic Coupon Note (DCN) is a more flexible "Snowball - like" product. It optimizes cash flow and meets regulatory requirements but still has risks, such as one - time principal loss at maturity and dependence on the futures discount environment [15][16]

Core Insights - The event "Stabilizing Enterprises and Protecting Agriculture - Apple Futures Serving Small and Medium Enterprises" was successfully held in Yan'an, Shaanxi, organized by Zhengzhou Commodity Exchange and China Futures Association, focusing on risk management applications in the apple market [1] - The conference attracted 84 representatives from 62 enterprises, providing practical solutions for small and medium-sized apple enterprises through keynote speeches and case analyses [1] Group 1: Market Analysis - Meng Xianqiang, Director of Agricultural Product Research, discussed the research logic of apple futures in an economic downturn, emphasizing the non-linear demand price elasticity and its role in price dynamics during inventory adjustments [3] - The core logic of apple market analysis is based on the dynamic equilibrium of supply and demand for elastic consumer goods, where the price center is primarily determined by quantity [3] Group 2: Delivery and Processing - Zhang Zhaohua, Deputy General Manager of Yanchang Fruit Industry, shared experiences in the application of machine selection processing for apple futures delivery, highlighting the increasing delivery volume and the challenges in quality grading and standardization [5] - The use of advanced machine selection equipment has achieved a 100% delivery success rate, suggesting the need for optimized industry chain collaboration and standardized production training [5] Group 3: Risk Management Strategies - Zhao Xiaojie, Manager of the Futures Department at Yanchang Fruit Industry, outlined strategies for using futures tools to serve small and medium enterprises, emphasizing the importance of hedging against price volatility [7] - The core value of futures tools is to help enterprises lock in profits, smooth cash flow, and enhance risk resistance, rather than serving as speculative instruments [7] Group 4: Futures Delivery Process - Li Weiwei, a delivery specialist at Rongda Futures, explained the strict processes and standards of futures delivery, which help enterprises effectively manage production plans and control delivery costs [9] Group 5: Options Trading - Yan Yaping, a derivatives researcher at Shanghai Rongzhi Industrial Co., Ltd., introduced four basic strategies for options trading and their applications in the operations of small and medium-sized apple enterprises, highlighting the advantages of options over futures [10] - The collaboration between Rongda Futures and Yanchang Fruit Industry aims to enhance financial services for the real economy, supporting the high-quality development of the apple industry [10]

Group 1 - Options are financial derivative contracts that grant the buyer the right to buy or sell an underlying asset at a predetermined price within a specified time frame, without the obligation to exercise that right [1] - The key features of options include the underlying asset, strike price, expiration date, premium, and contract size, which define the terms of the option [1] - Options provide four basic trading directions: buying call options, selling call options, buying put options, and selling put options, catering to different market expectations and risk management needs [1][2] Group 2 - Buying call options is suitable for scenarios where a significant price increase of the underlying asset is expected, allowing investors to hedge against rising costs [2] - Selling call options is appropriate in a sideways or mildly bearish market, where the seller can retain the premium if the asset price does not exceed the strike price [2] - Buying put options is used when a significant price decline is anticipated, enabling investors to lock in a minimum selling price [2] Group 3 - Selling put options can facilitate low-cost entry into positions, as demonstrated by Warren Buffett's strategy with Coca-Cola, where he sold put options to acquire shares at a lower effective price [4] - Selling call options allows investors to achieve high-price exits by setting the strike price at their desired selling price, thus generating additional income through premiums [5][6] Group 4 - The straddle strategy involves buying both call and put options with the same strike price and expiration date, profiting from significant price volatility regardless of direction [7] - The flexibility of options reflects the complexity of financial markets, enabling investors to optimize risk-return profiles and achieve more stable long-term returns [8]