Trading OTC Advanced Options and Derivatives

What You Will Learn

Topics covered include:

• What OTC derivatives are and how these instruments are used in the energy industry.
• When to use various linear and non-linear OTC derivatives.
• How to price linear OTC derivatives.
• How to price non-linear OTC derivatives.
• Weather derivatives.
• Types of basis risk, how basis is calculated and how to decide if basis risk should be hedged.
• What basis swaps are and when they should be used.
• Types of basis swaps including: fixed for floats, swing swaps, fixed for float swing swaps, index-differential swing swaps, EFPs, NYMEX Look-Alikes, extendible and cancelable swaps.
• The “Greeks”.
• Volatility: Historical and implied volatility (including volatility smiles).
• Option pricing models including Black-Scholes, Cox, Ross, Rubenstein and Monte Carlo models.
• Volumetric vs. delta hedging and how to simulate linear instrument hedge payout profiles with options.
• Directional option spread strategies including costless collars, bull call and bear put spreads, financed call and put spreads, ratio spreads and backspreads and Christmas trees.
• Volatility option spread strategies including calendars, straddles, strangles, iron butterflies and iron condors.
• Synthetic option strategies including long call, long put, short call, short put, long futures, short futures, conversions, reversals, box spreads and jelly rolls.
• Option exercise styles including American, European and Bermudan exercise styles.
• Power options including monthly power options and daily power exercise options.
• Exotic options including Asians, Spread Options, Digitals, Lookbacks, Barriers, Step-Structure Digitals; Contingent Premiums (Pay Later); Double Barriers; Double Barrier Boxes; Compound; One-Touch, Swing Options, callable and puttable forwards; strips of caps and floors; Embedded Swing options and best of options.
• Trading Simulations: Making Money with Option Strategies