Futures and Options - Analysis and Strategies

Wednesday, September 23

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Brief Review of Futures and Options Mechanics

• Types of Contracts
• Pay-Off Profiles
• Instruments and Markets

Analysis of Forwards and Futures

• The “Cost-of-Carry” Model
  • Fair forward price
  • Implied Repo Rate
• Valuing FX Forwards
  • Interest rate parity
• Valuation of Futures in General
  • Difference between forwards and futures
  • The role of daily settlement
  • The delivery option and the CTD Bond
• Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Analysis of Options

• Value and P&L Diagrams
• Minimum Option Value
• Put/Call Parity
• “Intrinsic” and “Time Value”
• Simple Option Pricing Model
• The Black-Scholes/Black Models
• Option Price Sensitivities (“Greeks”)
• Computer Simulations and Exercises
• The Cox-Ross-Rubinstein Model
  • Setting up the pay-off tree
  • Valuing American call and put options
• Valuing Interest Rate Options
• Computer Simulations
• Exercises

Thursday, September 24

09.00 - 09.15 Recap

09.15 - 12.00 Trading with Futures and Options

• What is a “Trading”?
  • Open position vs. relative value trading
• The Trading Process
  • Formulating expectations
  • Establishing a risk profile
  • Search and selection of strategies
  • Selecting the appropriate contract (strike, maturity etc.)
• Open Position Trading
• Bull Strategies
  • Long future, long call, bull spread, long semi-future,…
• Bear Strategies
  • Short future, long puts, short calls, bear-spreads,…
• Computer Simulations

12.00 - 13.00 Lunch

13.00 - 16.30 Trading with Futures and Options (continued)

• Volatility Strategies
  • Butterflies
  • Straddles
  • Strangles
  • Condors
• Workshop: Design Butterfly
• Workshop: “Twin Peaks”
• Spread Trading
  • “Straddles”
  • Intra-market spreads
  • Inter-market spreads
  • Calendar spreads
• Trading Weather, Energy, and Macro Futures and Options
• Follow-up Strategies
• Exercises

Friday, September 25

09.00 - 09.15 Recap

09.15 - 12.00 Hedging with Futures and Options

• What is Hedging?
• The Hedging Process
  • Identifying risks
  • Quantifying risks
  • Choosing hedging instruments
  • Calculating the hedge ratio
  • The importance of basis risk
  • Implementation and follow-up
• Single Position “One-to-One” Hedge
• Hedge with futures, put options or call options?
• Portfolio Hedging
  • Hedging a portfolio of stocks
  • Hedging a portfolio of bonds
  • Hedging a currency position
  • Hedging uncertain cash flows
  • Hedging contingent cash flows

12.00 - 13.00 Lunch

13.00 - 16.30 Hedging with Futures and Options (continued)

• Dynamic Hedging Strategies
  • Pro-cyclical and counter-cyclical strategies
  • Constant Proportion Portfolio Insurance with Futures
• Hedging with Weather, Energy, and Macro Futures and Options
• Hedging of Market-maker Positions in Futures and Options
  • Hedging futures with repos/cash instruments
  • Delta-hedging of options positions
  • Hedging of gamma and vega risks
• Exercises

Evaluation and Termination of the Seminar