Research On The Application Of Straddle Option Portfolio Strategy In Hedging Risk

As a mature derivative in the international market,option is also an important risk management tool.Since the launch of Shanghai Stock Exchange 50ETF option in 2015,there have been more and more options listed on the exchange,more and more operational risk management tools available to investors,and more investment strategies available to investors.However,most of the analysis and Discussion on the principles,construction methods and application scenarios of cross option portfolio strategy are focused on financial options.There are few studies on how the straddle option portfolio strategy is applied to the commodity field,especially in the price risk management of "insurance+futures".Taking the daily closing prices of 15 varieties listed on the exchange from November 16,2020 to November 15,2021 as sample data,this paper constructs a combination of cross option short strategy and wide cross option long strategy,and adopts dynamic adjustment of the exercise price of cross option short strategy to realize the delta relative neutrality of cross option short strategy.Using Python to write the model and back test,the results show that:through the straddle option short strategy to make up for the loss of time value of wide straddle options,we can well capture the benefits brought by the fluctuation of futures prices.According to the B-S Option pricing formula,the profit and loss of the short position strategy of the straddle option portfolio can be fitted through futures,as long as the delta neutrality of the portfolio assets is always maintained.Due to the lack of data on the use of futures to hedge cross option portfolios in the field of commodities,most domestic research in this field is based on financial options or foreign option data.This paper selects the interval method,which is widely used in the field of options,as the hedging method of simulated transactions.Taking sugar options and PTA options as samples,the simulation trading was carried out for two months from May 17.2022 to July 17,2022.The results show that the result of choosing futures to hedge the short strategy price risk of cross option portfolio is better than dynamically adjusting the option strike price to achieve the delta neutral result of cross option portfolio.This further verifies that the liquidity of the main futures contracts at this stage is better than that of the corresponding options,and the sliding point loss of futures trading is also small.From the results of the operation of the straddle option portfolio strategy model designed in this paper,it can be concluded that the short strategy in the straddle option portfolio strategy can effectively compensate the time value loss of the long strategy of the wide range option after futures hedging,and the long strategy of the wide range option can well realize the benefits brought by the trend market.The straddle option portfolio strategy can bring more stable investment returns for investors.It is also hoped that the straddle option portfolio strategy model can add new tools to the risk hedging process of "insurance+futures".