Advanced options

A two-day workshop

All involved with the trading of option-type derivatives.

Use Excel-based models to:

• review volatility
• develop a good understanding of option pricing
• explore the possibilities of various trading and hedging strategies.

Introduction to options markets.

• Option and market terminology.
• OTC option market contract specifications and practices.
• Pay-out diagrams at maturity and during the life of the option.
• Option premium calculations and the concepts of time and intrinsic value.

Volatility and put/call parity.

• Historical volatility.
• Implied volatility.
• Observed volatility – what actually happened.

Introduction to options pricing.

• Pricing an option is a two-part process.
• What drives an option price in the secondary market?

Option Greeks.

• Calculating and explaining the “Greeks”.
• How an option price moves for changes in: spot prices – delta and gamma; time – theta; volatility - vega; interest rates – phi and rho.

Hedging strategies.

• Know your customer - before advising a customer it is necessary to know their market expectations and risk tolerance.
• Defining market expectations for: stock prices/volatility/interest rates.
• Defining customer risk tolerances/reward expectations.
• Constructing hedging strategies for individual equity positions including buying puts/writing calls/buying collars/buying participating collars.

Delta hedging and trading an option book.

• Trading market direction using bull and bear spreads.
• Trading expected increases in volatility using straddles.
• Creating forward positions in volatility using calendar spreads.
• Using positive gamma in an option book. 
• Using risk reversals to change the properties of an option portfolio.

Barrier options.

• What are barrier options.
• How are barrier options priced.
• Barrier parity.
• Types of barrier options.
• Pricing regular barriers.

Binary options.

• What are binary options.
• How are binary options priced.
• American versus european binaries.
• Using binaries to produce: no use – no pay options/options with rebates.

Hedging strategies.

• Forward extra.
• Forward plus.
• Contingent risk reversal.
• Forward reset.
• Maturity off-set KI/KO.

Each day of the programme starts at 9.00am and ends at 5.00pm. Lunch and refreshments are provided. It is non-residential.

12 CPD hours (where applicable)

A good understanding of options is assumed.

Find out more
If you have any queries please email or phone us on +44 (0)845 026 4722.

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