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Learn/Options pricing and volatility

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Learn Options pricing and volatility

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B Basic

Parity and no arbitrage bounds10m
One step trees and risk neutral pricingPro11m
Black Scholes by rule of thumbPro10m

A Advanced

The greeksPro12m
Delta hedging and gamma P&LPro12m
Implied vol, skew, and spread arbitragePro11m

FlashcardsPro0/15
Basic quizPro80% passes
Advanced quizPro80% passes
Terms

Options pricing and volatility

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Flashcards Start the first lesson

Parity, binomial trees, Black Scholes by rule of thumb, the greeks, delta hedging, and implied volatility. What an options market making round expects you to do in your head.

BBasic3 lessons

1Parity and no arbitrage boundsA call, a put, the stock, and cash are tied together so tightly that knowing three prices gives you the fourth. The bounds that follow catch most mispriced quotes.10 min
2One step trees and risk neutral pricingProIn a world with two outcomes, any option can be copied with stock and cash. The cost of the copy is the price, and it does not depend on how likely the outcomes are.11 min
3Black Scholes by rule of thumbProNobody runs the formula in their head. Traders use two approximations for at the money options and a square root of time rule for everything else.10 min
Basic quizPro10 questions, 80% passes

AAdvanced3 lessons

4The greeksProEach greek is a sensitivity: how the option price moves when one input moves. Market makers run their book on these numbers, not on prices.12 min
5Delta hedging and gamma P&LProA delta hedged option is a bet on volatility. Long gamma earns on big moves and pays theta every day; the break even is the move implied vol priced in.12 min
6Implied vol, skew, and spread arbitrageProImplied vol varies by strike and by expiry. The shape is information, but some shapes are impossible, and spotting those is free money.11 min
Advanced quizPro10 questions, 80% passes