Report Industry Investment Rating No relevant content provided. Core Views - The core pain point of the futures basis - eating strategy lies in the forced - liquidation risk and capital occupation pressure brought by leverage. In a falling market, margin calls increase capital allocation difficulty and affect investment experience [4]. - The in - the - money call option basis - eating strategy has three core advantages: no need to worry about forced liquidation and margin calls, more stable capital occupation; low time - value proportion, less impact of time - value erosion on returns; cash - settlement mechanism is suitable for long - term holding, reducing the negative impact of illiquidity [4]. - Long - term backtesting shows that the return trend of the in - the - money call option strategy is basically consistent with that of the futures basis - eating strategy, with a better maximum drawdown. The improved "optimal contract with the smallest time value" strategy boosts the annualized return by about 4.3% and reduces the maximum drawdown by about 13.4%, making the risk - return ratio more attractive [4]. - The in - the - money call option strategy performs stably in different market environments: it can capture upward returns in a bull market, reduce losses due to automatic Delta reduction in a bear market, and is less affected by time - value erosion than at - the - money options in a volatile market, suitable for diverse market scenarios [4]. Summary by Directory Preface - The CSI 500 and CSI 1000 index futures have long had significant basis. Although the futures basis - eating strategy can bring excess returns, the leverage scares some investors. The biggest risk is the falling - market risk, which may lead to margin calls and forced liquidation. It also increases the difficulty of capital allocation among different strategies [9]. - The report aims to propose an option - based basis - eating strategy to help investors better obtain basis returns [10]. Introduction to the In - the - Money Option Basis - Eating Strategy - A common option - based basis - eating idea is to buy a call option and sell a put option with the same strike price and expiration date to replicate a futures long position. However, this synthetic futures portfolio is not discussed in this report as it has no essential difference in profit - and - loss compared to the futures long position [11][12]. - Buying deep in - the - money call options can enjoy basis returns. This strategy has advantages such as no forced - liquidation risk, less impact of time - value erosion, and reduced negative impact of illiquidity. But it also has disadvantages like higher capital occupation and some negative impacts from illiquidity [12][13][16]. Long - Term Performance Comparison of Each Basis - Eating Strategy Backtest Settings - Backtest target: CSI 1000 index futures and options; backtest period: from July 22, 2022, to November 4, 2025; backtest contracts: near - month contracts for both options and futures; opening time: at the opening; trading costs: futures commission is 0.003%, option commission is 20 yuan per contract, and option slippage is 0.05% [19]. Futures Basis - Eating - Since the listing of IM, continuously rolling long the near - month IM contract can achieve an annualized return of about 9.37% (without leverage), with an excess return of about 7.39% compared to the index. The basis has deepened in recent years, and the future excess return is expected to be significantly higher than the average of 7.39% since listing [19]. At - the - Money Call Long Substitution - When using at - the - money call options to replace the futures long position, the long - term return seems better, mainly due to the significant gains during the continuous bull market in 2024. However, it underperforms in the volatile market from July 2022 to the end of 2023 because of continuous time - value erosion [23]. In - the - Money Call Option Basis - Eating - Using in - the - money call options to eat the basis, the long - term return trend is similar to that of the futures long position, but the annualized return is slightly lower due to time - value erosion and trading slippage. The maximum drawdown is improved as the directional exposure decreases during a falling market [25]. Improved In - the - Money Call Option Basis - Eating - Selecting the in - the - money call option contract with the smallest time value for opening positions can improve the annualized return by about 4.3% and reduce the maximum drawdown by about 13.4% compared to the futures basis - eating strategy. However, it may be difficult to replicate the backtest results in actual trading [30][32]. Summary - The net - value curves and risk - return indicators of each strategy are presented for reference [33]. Actual Case Analysis of Basis - Eating Bull Market - In the bull market from July to August 2025, the at - the - money call long strategy is the most suitable, with the smallest capital occupation and the largest profit. The in - the - money call basis - eating strategy and the futures basis - eating strategy have similar profit - and - loss and capital - occupation situations [40][45]. Bear Market - In the bear market from the end of 2023 to the beginning of 2024, the at - the - money call long strategy is the most suitable due to its limited - loss feature, with small capital occupation and small losses. The in - the - money call basis - eating strategy and the futures basis - eating strategy have similar profit - and - loss, but the futures strategy has much higher capital occupation [48][54]. Volatile Market - In the volatile market in September 2025, the at - the - money call long strategy performs the worst due to high time - value erosion, with small capital occupation but large losses. The in - the - money call basis - eating strategy has smaller losses but higher capital occupation compared to the futures basis - eating strategy [57][63]. Conclusion - The in - the - money call option basis - eating strategy is a feasible and advantageous alternative to the traditional futures basis - eating strategy. It can capture basis returns under controllable risks. The improved strategy further optimizes the return performance. It is suitable for investors seeking stable basis returns and avoiding leverage risks, especially as a sub - strategy in a portfolio. Attention should be paid to option liquidity and trading slippage in actual trading [65].