Commodities, Derivatives and Structured Products
Options – Part 10
This eCourse consists of three modules on option trading. Module 1 discusses the use of options in directional and volatility trades. Key combination strategies such as covered call, strangles, straddles, are also dealt with in detail.
Option spread strategies involve buying and selling options on the same underlying but with different strike prices or expiration dates. The focus of Module 2 is vertical spreads, where the strike prices of the options are different. Participating forwards which involve opposite positions in calls and puts on different amounts but at the same strike are also covered in detail.
Options dealers hold a wide range of options positions with different maturities and exercise prices. Module 3 looks at how such dealers manage the risk of their portfolios and how option position risk reports are generated in Excel.
On completion of this course, you will be able to:
- Recognize how options can be used to take views on both market direction and implied volatility
- Identify the main benefits and drawbacks of options as directional instruments
- Recall the main combination trades, such as straddles, strangles, and covered calls
- Recognize how debt and credit spreads are used to exploit bullish and bearish market views
- Recall how participating forwards are used to hedge FX risk while still allowing the hedger to participate in any upside
- Identify the key sensitivities associated with managing an options portfolio and how these are managed using techniques such as the risk ladder
- Recognize how options dealers use static and dynamic hedging to manage risk exposure
- Recall how a risk report is generated and identify the key features of such a report
Module 1: Option Trading – Combination Strategies
Topic 1: Options in Directional & Volatility Trades
Topic 2: Key Combination Strategies
Module 2: Option Trading – Spread Strategies
Topic 1: Vertical Spreads
Topic 2: Participating Forwards
Module 3: Option Trading – Managing an Option Portfolio
Topic 1: Managing Option Sensitivities
Topic 2: Generating a Risk Report