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# Category: Level II Derivatives

## Short Butterfly Spread

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but…

## Short Strangle

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but…

## Inverse (Short) Straddle

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but…

## Option Greeks

The option Greeks – delta, gamma, theta, vega, and rho – refer to sensitivities of the price of an option to various underlying variables. Here, we’ll be talking about options on stocks, though the discussion would be equally appropriate for options on, say, commodities. It would not be appropriate for a discussion of options on…

## Covered Call

## Protective Put

## Delta Hedging

There are two applications of delta hedging presented in the CFA curriculum: You have an existing position in the underlying security and you want to hedge that position with options. You have an existing position in options and you want to hedge that position either with the underlying security or with options. I’ll cover both…

## Roll Yield (Roll Return)

The idea of roll yield – or roll return, same thing – is relatively straightforward: it’s part of the increase or decrease in the value of your portfolio that arises specifically when you roll over an expiring futures or forward contract into a new contract. The other parts of that increase or decrease are the…

## Equivalence of Derivatives (Swaps, FRAs, and Interest Rate Options)

Various interest rate derivatives are, in fact, equivalent to each other; i.e., they can be structured to generate equivalent (though not necessarily identical) cash flows. This article will explain how these derivatives can be structured to be equivalent to each other. First note that you will not be asked on an exam to create equivalent…

## Box Spread