50ETF option seller defaults on exercise and delivery (actual case)
We know that 50ETF option transactions generally choose to close the position, but for professional institutions, especially professional investors who are sellers, exercise and delivery are generally involved.
On the exercise day, when the buyer proposes exercise and delivery, the Shanghai Stock Exchange and China Clearing Corporation will match the seller. At this time, the 50ETF option seller must prepare a large amount of cash or 50ETF fund spot to cope with the exercise of the 50ETF option buyer.
If the seller does not prepare enough cash or 50ETF fund shares, then a breach of contract will occur:
1. Deduct liquidated damages and pay fines
2. The rating of the corresponding futures company will be affected
Regarding this case (default of the 50ETF option seller), from The personal experience of friends around me is for reference only. I hope it can inspire and help the majority of options sellers and friends who are concerned about option exercise.
I feel like I have been through a fierce battle in the past two days, and I am just relieved now. As the first option delivery default customer of a futures company since the options were launched, first of all, one of my mistakes may lead to the credit rating of a certain futures. However, After the incident happened, a brother from a certain futures company comforted me while communicating with me about the solution. Thank you!
I need to write down what happened, as a warning to more option investors coming from 300etf options in the future.
On December 25, 2019, the expiration date of the December index options contract, I had ,400 obligated put positions (sellers) near the even value, although the account manager started reminding me to close the position at 2 p.m. (If you do not close the position, you will be assigned to exercise delivery. You must prepare cash or 50 ETF spot)
Due to family matters, I have been accompanying patients in the hospital for the past two days, and I have not had the time or mood to pay attention to the market. I want to give it a try at the end. All positions were closed. I was selling the doomsday round. I started selling it about three days before expiration. Due to the sudden drop in the market, the contract changed from virtual value to real value. I suffered a loss of about 40,000 in my position. On the day of the exercise of
50etf, the market opened low in early trading and kept fluctuating. It dived slightly at 2 o'clock in the afternoon, and then pulled up at the end of the day. Although 50etf pulled up, the put contract rose sharply at the end of the day, and the contract with an intrinsic value of about 200 soared to 250. -260. Due to lack of experience, I personally mistakenly expected that the premium would disappear as the market closes. Therefore, I hope that by delaying it until the end, I can reduce the loss of the premium. Finally, I hurriedly closed the position at 14:56, but I didn’t have enough time to complete the transaction. If If it falls flat, the loss will be about 60,000-70,000 yuan. (This is because there are not enough counterparties in the market, and the time is too short. I can’t find so many people to take the goods, so I can’t close the position)
My last 430, If all the rights are exercised, I will prepare 12.9 million in cash to accept the rights. If the 50etf spot delivered to me is 100% exercised, breach of contract is obviously inevitable, although I did not know the possible consequences of breach of contract at the time (liquidated penalty of 1%, about 130,000, and annualized interest of 1.68% calculated on a daily basis, Of course, money is not the most important thing, the most important thing is that it will affect the credit rating of the futures company), and the impact of this consequence was not considered.
's obligated position has not been closed. Strictly speaking, this is the second time for me to enter the exercise assignment process. On July 24 this year, the July 50ETF option contract expired, and the call option with an exercise price of 2.95 was virtualized in the last 3 minutes today. The value turned into real value. Finally, due to the circuit breaker that started at 14:54 and lasted until the closing call auction, the last transaction volume reached 28,000, and finally closed at 5 yuan (intrinsic value of 20 yuan). There are still more than 40,000 options that will be exercised. At this stage, I happened to have 61 positions that were not closed due to the circuit breaker. If all options were exercised, I would buy nearly 1.8 million 50ETF for spot delivery. Finally, the assigned exercise results came out. Of my 61 contracts, only one was assigned to exercise, which means that almost all of the 40,000 C2.95 contracts in the entire market abstained, and the abstention rate exceeded 98%.
The difference is that the intrinsic value of the previous contract was only 20 yuan. In order to earn 20 yuan, the right party needs to prepare 30,000 yuan. Many rights parties simply gave up on this 20 yuan contract, so my 60 unexercised contracts are equivalent to The right party sent a red envelope of 1,200 yuan. (The buyer gives up the exercise, so the remaining price of each contract is 20 yuan, which is equivalent to giving it to the seller for free)
After the market closes, the exercise assignment result came out at 6:30. Before that, because of the last time Experience, I was lucky and hoped that the exercise rate would be low. But this time it was a real-valued contract with an intrinsic value of 200 yuan. 430 contracts were assigned to be exercised, and 391 contracts were assigned. The abstention rate was 10%. The exercise rate was 90%, 391 contracts. I needed 11.73 million in cash to accept spot goods. The next thing I faced was how to find so much money. Thanks to so many brothers for their help, I spent one night and one morning, and finally collected about 9 million. Although in the end, about 2.7 million defaulted, but I Try your best to minimize the impact of things. The development of
options in China has only just started. I hope that one of my lessons can give some warning and reminder to newbies. If there is not enough cash to deliver the spot on the expiration date, be sure to close the position in time to avoid injuring yourself and others. Cause unnecessary trouble.
Of course, if you have enough cash to deliver, and the direction of your underlying position is consistent with your position, you can choose to be assigned to exercise the option. If you exercise the option in full this time, the market 50ETF will increase by 0.74 the next day. %, if you sell in the flat on the third day, you will get 70,000 more profits for 10 million, and at the same time save 50 premiums, which is close to 20,000, and the red envelope for abandonment is 39 yuan* (200 intrinsic value plus 99 premium) 10,000 More than one thousand yuan. And I had a default of 2.7 million yuan. After deducting the 27,000 yuan in liquidated damages, I still made tens of thousands more yuan. The loss turned into a profit.
Everything cannot be perfect, I have tried my best, and the lessons are mine. I hope it can give you a little warning, and I wish you all a prosperous future in options investment.
