Understanding & Using Options Training Course
Course Highlights and Agenda
IFF has created this practical training course to bring you up-to-speed with everything you need to know about options markets, their valuation, hedging and structuring. The course introduces the fundamentals of options, key options strategies, valuation and hedging, the uses of options in equity, FX and interest rate markets. Numerous case studies give practical illustrations of the key issues. In particular, delegates will be introduced to exotic options, their features and how to use them most effectively. They will develop and analyse a variety of structures and portfolios.
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Agenda
DAY 1
Options: The Fundamentals
- Definition, conventions and terminology
– price
– quotes
– settlement - Puts and calls and what they mean
- American, European and Bermudian options
- Intrinsic and time value
- Understanding at, in, and out of the money options
Basic Option Strategies with a Focus on Currency Options
- Call and put spreads
- Collars
- Calendar spreads
- Straddles and strangles
- Box spreads
- Other applicable strategies
- Put and call parity
- Understanding currency options
Case Studies: Delegates will develop a variety of option combinations to understand strategies
Risk Management – Understanding the Greeks and their Interaction
- Delta
- Gamma
- Decay
- Vega
- Rho
- Delta hedging
- Trading a book and seeking Gamma
Case Studies: Delegates will establish a portfolio in Excel and its profit, loss and decay will be monitored as variables change
DAY 2
Volatility
- Volatility concept and impact on pricing
- Term structure
- Smile (straddles, risk reversals and butterflies)
- Forward volatility
- Historical – Implied - Actual
- Hedging and trading an options book
- Volatility surfaces
- Other mark to market issues
Interest Rate Options
- Caps
- Floors
- Collars
- Swaptions
- Bond options
Case Studies: Comparing caps, swaps and collars to hedge interest rate risks
Option Pricing Tools
- Basic probability
- Normal distributions
- Lognormal distributions
- Mean variance analysis of asset returns
- Understanding the Black-Scholes equation
- Problems with Black-Scholes
- Kurtosis
Case Studies: Demonstration of pricing and the Greeks in Excel
DAY 3
More Complex Options
- Digitals: European options
- Accrual options
- Asian options
– average rate
– average strike
– one touch no touch
– single and double - Barrier options:
– European and American
– single and double
– knock-in and knock-out - Discrete and window options
- Binary options
- Basket options
Case Studies: Delegates will work on using digital, barrier and Asian options for hedging currency risk. They will also learn how range accrual and basket options enhance yield for MTNs
Exotic Options and Their Pricing Features
- Basket options
- Quanto options
- Pricing using Binomial trees
- GARCH methods
- Stochastic volatility models
Structuring Bonds and MTNs Using Options
- Equity Linked Transactions
- Convertibles
- FX linked notes
- Credit Linked Notes (CLNs) with an option element
Case Studies: A variety of structured products will be dissected
What You Will Learn
Attend this comprehensive training course and:
- Understand the mechanics of option pricing and valuation
- Create trading strategies using single and multiple options
- Learn how to exploit arbitrage opportunities using leverage
- Develop efficient hedging strategies and understand when they can fail
- Understand how to manage the risks inherent when using options
- Learn practical techniques for building and pricing sophisticated structured products
Reviews
"Well established programme and good experience of the trainer."
