The Greeks & Option Risk Management

This course gives participants a deeper understanding of option pricing. It looks at the importance of volatility in option pricing and how this can be implied from the value of the other components of option pricing. It explains the “Greeks” in more detail and how these are important to option trading and hedging. It explains how both delta and gamma can be calculated so that you can take a trading position based on your view of the movement in both of these. It also looks at how delta is used to ensure that a hedge continues to give you the protection against further movements in the underlying financial instrument on which it is based.

Suitability

For individuals with a working knowledge of options

Learning Outcomes

At the end of this course delegates should understand_x000D_
– Implied option volatility, smile, skew, surface and trade feasibility_x000D_
– The role and importance of the Greeks in option trading_x000D_
– How to delta hedge a book and the process of gamma trading

Course Content

Implied Volatility
‐ Implied vol. as a value indicator
‐ Implied vol. term structure
‐ Smile & skew
‐ Surface

Exercises: Calculating and interpreting volatility

The Greeks
‐ Theta
‐ Delta
‐ Gamma

Trade Feasibility
‐ Pricing off observed implied vol.
‐ Pricing off historic vol.

Delta Hedging a Book
– Worked example

Exercises: Calculating net delta trade for a trader’s book

Gamma Trading
‐ Gamma behaviour
‐ Making money out of gamma

Exercises: Calculating the delta hedging and gamma trading required on a range of option trades

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Why study with Alpha?

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We are thought leaders in instructional and learning journey design and holistic solution architects. We have extensive finance and investments experience combined with skills application to deliver performance improving results. We develop immersive learning environments that maximize time to productivity, support talent retention and added value to improving quality of hires.

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We are focused on mining the embedded organisational intellectual capital for the benefit of the next generation. We create and curate best in class practice gathered from our experience with the leading financial institutions. We design our programmes with the end in mind – what results are you trying to achieve with this intervention? What metrics will we set ourselves to achieve that?

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Quality and innovation, using current market and industry best practices, have made us a trusted partner in delivering dynamic and motivating training for the financial and capital markets. Our programmes are generation proof and responsive to evolving learner needs and styles. Our solutions use a multi-stakeholder engagement strategy that expands beyond relationships between the learner and learning provider. We create connections with managers, peers and the wider business to drive impactful return on investment..

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