1: Stochastic Processes
Option contracts – are an arrangement entered between two parties where the buyer has the right but not the obligation…
2: Pricing of an Option
Pricing of an Option – Most pricing models calculate the price of an option using some form of hedging such that the portfolio of the option…
3: Intuition behind Black Scholes
Black Scholes option pricing equations for a European Call ( C ) and European
Put (P)
6: Volatility and its smiles
Implied vs Realised Vol – an extensively used term for the options world and one that crucially determines an option’s price…
8: How Greeks adapt to smiles
Hedging and valuation of the option portfolio also crucially depends on the vol model assumptions…
9: Straddles
While it’s hard to lay out watertight rules for structuring strategies (as markets can throw unimaginable circumstances)…
10: Strangles
This is a cheaper variation of a straddle that involves going long an OTM put and an OTM call again usually structured…
11: Bull Spread
Generally structured as buying a lower strike (base case at the money) call and selling a higher strike…
12: Bear Spread
Generally structured as buying a higher strike put and selling a lower strike put for the same expiry and same notionals…
13: Calendar spreads
Is a strategy to go short time decay by selling a shorter expiry option and buying a longer expiry one…
