Course outline: Options

In-house Training

Capital Markets & Derivatives Training specialise in developing and delivering bespoke in-house training courses and programmes. This sample course outlines the content and structure of a typical course.

Objective: This course explains in detail how option prices are calculated and explores the main types of option strategies, uses and applications. It is assumed that the delegate is already conversant with basic put and call theory from the understanding futures and options course.
Course aims:
  • Examine how options work
  • Calculate how options are priced
  • Using the Greeks
  • Exploring the different trading strategies

Options Contract Review

This section reviews the basic jargon and terminology of calls and puts and ensures all delegates are conversant with the different expiry profiles.

  • Defining an option call/put
    • rights and obligation
  • Terminology explained
    • exercise, intrinsic and time value
    • Types of options
  • Risk reward profiles explained
  • Users and uses versus futures

Pricing Options

Pricing options looks at the basic theory of probability and how this is applied to options contracts.

  • Intrinsic and time value
    • option premium and the impact of time
  • Calculating expected loss
  • Review of probability theory
    • normal distribution and standard deviation
  • Volatility types
    • implied, forecast , historic
  • Types of option pricing models
    • advantages and disadvantages
  • Use of models

Option Sensitivities

This section explains how an options price can be predicted using various inputs into a pricing model.

  • Explaining the sensitivities
    • delta, gamma, theta, vega and rho
  • Applying the sensitivities
    • trading and hedging purposes
  • Position analysis

Option Strategies

There are many strategies that can be created by using options and the underlying product, this section explains the main strategies and other synthetic relationships.

  • Distinguishing between volatility and directional trades
    • simple option trades versus spreads
  • Main strategies explored
    • Call/put spreads
    • e.g. straddles, strangles, butterflies
  • Synthetic relationships
  • Hedging applications
    • using options to hedge with greater flexibility
  • Options as insurance or enhancement
  • Caps/floors/collars
  • Exchange v OTC options

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