You want to understand how Options work and how you can use them in your investment decisions? Or are you a student who is not happy with his professor and want to hear about Options from a seasoned finance professional? Then you are in the right place. This course teaches you everything you need to know to become familiar with Options and what impacts their price. Also, you will understand how you can use Options as an addition to your portfolio and how you can analyze different option strategies.
Topics Covered include Black-Scholes, common option combinations, Put-Call Parity, Trading Strategy backtests, Option Greeks and jargon used in the derivatives world.
The teaching will be presented in Power Point and Excel form. The Power Point slides are created in an interactive way so that you won't be starring at the same slide for ages.
So what are you waiting for? I hope to see you in my course.
I give some details on my background and an overview of what you can expect when going through the course
Introduction of my book "European Options - An Intuitive and Illustrative Approach" available on Amazon and a summary of the knowledge you will have gained upon finishing this course
You will be familiar with common terminologies and notations used, such as Intrinsic Value/ Option Premium/ Moneyness (ATM/ ITM/ OTM)
Explanation of what a call and put option are and their payoff profiles including their value profiles
You won't be afraid of the Black-Scholes Formula anymore (at least I hope so) and see that it is actually pretty simple. I will also explain the pricing inputs needed to this formula.
What is Implied Volatility and how is it observed in the market? You will also become familiar with Volatility Smile and Volatility Term Structure.
A quick overview of the difference between American and European Options
How to calculate a Forward Price and the Cost of Carry
How to calculate d1 and d2 as well as Nd1 and Nd2. These are part of the Black-Scholes formula and are required to price options as well as calculate their greeks.
How to calculate an Options Intrinsic and Time Value. As part of that we will also use the Black Scholes formula.
What is Gamma and how is it calculated
The impact of a change in volatility to the option price.....vega
The clock is ticking.....the impact of the passage of time. I will also talk about the difference between Theta ex drift parameters and the Black Scholes Theta.
Cost and Income.....the impact of changes in Interest Rate and Dividends
Illustration of how to calculate European Call/Put Option Greeks in Excel
Excel based example of how to use the before calculated Greeks to estimate a new option price if one of the inputs changes
This video will give you an overview what the formula is about. It will also remind you of the notation being used. Power Point slides are also attached.
To understand the formula best, it is easiest to go through a specific example.
This is slightly technical, but not mathematically technical, rather logically. I will take you through the calculations needed to retrieve an Options Input Prices using a Box Spread, Put-Call Parity and the Black-Scholes formula.
Here we do the same as in the previous lecture but using the Black 76 formula instead of the Black-Scholes formula....only a minor modification.
Excel based exercise for the arbitrage example discussed earlier on.
Using a Box Spread and Put-Call Parity to calculate implied interest rate and dividend
Iterating through the Black-Scholes formula to obtain the implied volatility. I will also show you how you can do this using Excel's Solver tool.
An overview of the strategies that will be discussed, like Call or Put Spreads/ Strangles/ Straddles/ Butterflies/ Ratio Spreads/ Risk Reversals/ Calendar Spreads/ Synthetic/ Box Spread.
What happens when we combine a long call/put position and a short call/put position?
Two similar structures that pay off if the underlying moves a lot.
A combination of three options with which you make money (if long) when the underlying stays within in a certain range.
A slight modification of a call/put spread which we saw in the first part of this chapter.
A combination of a Call and a Put Option, where the Call has a higher Strike Price than the Put.
The only strategy discussed here, where each leg has a different time to maturity.
Just replicating the underlying.....more or less.
You have come across this one before. The only strategy which is sensitive to interest rates and passage of time only.
This lecture gives a brief overview of the assumptions made and the data used for backtesting the trading/investment strategies. It also explains which strategies I looked at (Long Only/ Call Overwriting/ Delta Neutral).
Brief description of the long only strategy and the backtest.
Description of how the strategy works and which calculation steps where performed to achieve the backtest result.
Explanation of the assumptions used to perform the backtest for the Delta Neutral Strategy, as well as an explanation of how to trade this strategy.
Discussion of the backtest results.
Calculations and output for the long only backtest. Attached to this video is the data I produced for each strategy in an Excel spreadsheet.
Step by step example of how to perform the backtest for the Call Overwriting strategy.
Description of daily calculations performed for the Delta Neutral Strategy.
Explanation of daily calculations done for the cash position of the strategy.
Calculations performed on an expiry date.
Harun Mirzakhel has more than 10 years experience working in the financial industry. His area of expertise covers the structured products world and equity derivatives. He started his career in October 2006 as an equity derivatives trader at Sal Oppenheim in Frankfurt where he covered singe stock plain vanilla products and light exotics. After three years he moved to the index desk covering European indices. In 2010 he began working for Macquarie in Frankfurt and moved for Macquarie to London in 2012. In 2015 his financial industry journey took him to UBS in London where he worked on a project related to their algorithmic index business and afterwards, started at Bank of America/ London in 2016 as an Equity Derivatives Risk Manager.
He is the author of "European Options - An Intuitive and Illustrative Approach" (ISBN: 1537515861)