Introduction to Options
March 28, 2012 June 7, 2012
Registration Fee: US$995.00 Register Location Instructor
Many classes sell out; we suggest registering at least one week in advance to ensure availability.
Beginner Level, 7 CPE Credits
Instructor: Charles Gates
Hours: 9:00 am - 5:00 pm; Registration/Breakfast begins at 8:30 am
This interactive course focuses on the fundamentals of options. Examples are used from all of the major asset classes. The course guides the participant through the language of options and builds a foundation such that the beginner gets a handle on the basics of pricing and applications. The approach during the valuation session is intuitive and non-mathematical. This will help the participant understand how the price of the option changes given a change in the various pricing components. Option strategies are analyzed at the initiation of the trade as well as after the trade. Portfolio management strategies using options are evaluated and their underlying rationale discussed.
Objectives:
By the end of the course, the participant will be able to:
- Describe the features and characteristics of options
- Apply basic option strategies in trading and portfolio management
- Identify the risks associated with options
- Explain the basics of pricing and describe the variables required for option pricing models
Session 1: Options Overview
By the end of the session the course participant will be able to:
- Define calls and puts
- Contrast exchange-traded versus over-the-counter
- Identify the major players
- Differentiate between futures and options
- Describe exercise and assignment for listed options
- Discuss in, at and out of the money
- Show intrinsic value + time value = premium
- Identify the main pricing components of an option
- Describe payoff profiles of the respective options
- Identify the risks associated with options
Session 2: Option Valuation
By the end of the session the course participant will be able to:
- Demonstrate the impact the different pricing components have on the price of the option:
o Price of the underlying
o Strike price
o Volatility
o Time to maturity
o Interest rates and dividends
- Compare and contrast historical and implied volatility
- Intuitively analyze the pricing components and how they relate to the:
o Black Scholes
o Binomial model
- Understand volatility and how market participants use the different volatility curves, smiles and skews to analyze the market
Session 3: Basic Trading Applications
By the end of the session the course participant will be able to:
- Demonstrate basic applications
- Outright directional trading
- Spreads
- Covered calls
- Analyze the position after the trade has been made when volatility and the price of the underlying has changed
- Analyze hedging using options in portfolio management
o Insurance companies
o Asset managers
o Traditional portfolio management