Commodity Option Trading Plan Planning Based On Volatility

Commodity options play a very important role in the whole capital market.They cooperate with futures and spot,and have unique functions in reducing the risk of commodity indus trialization and promoting the income of commodity producers.In 2017,Dalian Commodity Exchange and Zhengzhou Commodity Exchange successively launched soymeal options and sugar options.After more than two years of steady development,China's commodity options trading has become more and more active,and more and more market investors have participated in it.However,at present,the participants in the commodity option market mainly take speculation as the main purpose,the uncertainty of price volatility at the beginning of listing and the cautious regulatory measures of market regulators make the current commodity option trading irrational space.In actual trading,the judgment of the underlying asset price and volatility trend is mostly based on the experience of investment managers and fundamental analysis,and then make investment decisions.In order to minimize such subjective intervention,this paper introduces a decision tree model based on C5.0 algorithm to make a preliminary judgment on the price change of the underlying asset,and then selects the corresponding volatility trading strategy according to the volatility.After model test and improvement,the prediction accuracy of the model can reach 81.7%,and the three technical indicators,ROC,CCI and MTM,have significant influence on the classification results.By studying the volatility time series of the main futures contracts of soybean meal,it is found that the volatility of the main futures contracts of soybean meal also has momentum characteristics in small cycles and oscillations in large periods,and vulnerable to the impact of fundamental events and the sudden rise of volatility.In order to better apply commodity options to investors' risk management,this paper selects 30-minute data as time window,from participating in the market,position management,timing strategy,stop-loss method,Five aspects of trading strategy have formulated the soybean meal option volatility trading scheme.Among them,the position management scheme adopts dynamic adjustment: on the one hand,it makes fund allocation plan,on the other hand,it has a position management of real-time position adjustment.And the time-choosing strategy we used is: momentum-time-selective opening and reverse-timing-closing.In the rationality test of the scheme,the average annualized return of the scheme is 12.87%,the average daily return is about 0.05%,the sharpe ratio is 0.6098,the maximum drawdown is 9.18%,and the retracement return ratio is 1.725 by using the scheme between June 13,2018 and December 28,2018.In view of the high leverage inherent in option trading and the fact that this scheme only involves the buying and selling of a single type of equal-value option,this scheme not only achieves high returns,but also takes great risks.Investors should pay attention to the following risks when using this scheme :(1)the misjudgment loss caused by the prediction of market trend by the decision tree model.(2)transaction cost losses caused by continuous adjustment of option positions.(3)risk profit game between Gamma,Vega and Theta.