Course description
Foundations of Currency Options
The Foundations of Currency Options course is a highly practical seminar taking participants from the essentials of FX options through to their use for hedging and trading.
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Upcoming start dates
Who should attend?
Who Should Attend
Anyone working in FX risk management, currency sales and trading, companies with multi-currency operations, or those advising clients on managing their FX risk.
Prerequisites
A good working knowledge of the FX spot and forward markets.
Training content
Review of Foreign Exchange Forward and Swaps
- Outright forwards and swaps
- Impact of interest rates
- Relation between spot and forward markets
- Quoting forward rates and swap points
- Forward discounts and premiums
- FX swap points and interest rate parity
- Risk from FX swap transactions
Review of Options
- Options definitions and terminology
- Calls and puts; buying and selling
- American vs. European style
- In-, at-, and out-of-the-money
- Intrinsic and time value
- Components of time value
- What the buyer pays for – the true cost of an option
- Value and profit profiles
- Profit profiles at maturity
- Profit profiles prior to maturity
Option Pricing – An Intuitive Approach
- Types of option pricing model
- Currency option pricing workshop
- Binomial option pricing
- Monte Carlo option pricing
- Time value revisited
- Early exercise of American options
- Put-call parity
- Significance of volatility
- Historic, implied, and experienced volatility
- The term structure of volatility
- Volatility smiles and skews
Option "Greeks"
- Measuring dimensions of option risk
- Delta – the hedge ratio
- Gamma – the change in delta
- Theta – the decay of time value
- Vega – the sensitivity to volatility
- The Greeks of short-dated options compared to long-dated options
- The Greeks of ATM options, compared to ITM or OTM options
- Greeks workshop
Understanding FX Options
- Calls are Puts!
- FX option trading conventions
- Dates: premium payment, expiry, and settlement
- Tokyo vs. New York cuts
- Quoting volatility
- Quoting deltas
- Live options vs. delta exchange
- The 25 D strangle
- Risk reversals
Building Option Portfolios
- Horizontal, vertical, and diagonal spreads
- Straddles and strangles
- Ratio spreads and backspreads
- Designing your own structure – a fluent transition between payoff diagrams and component parts
Hedging and Financial Engineering with FX Options
- Comparison of using in-, at- and out-of-the-money options
- True cost of options hedging – time value
- Hedging techniques using short option positions
- Creating and using collars or risk reversals
- Creating and using spreads
- Zero-premium hedges
- Creating and using zero-cost collars
- Creating and using participating forwards
- Deferred and embedded premiums
- Creating and using break-forwards
- The "continuum" from in-the-money to out-of-the-money options
- Hedging FX risk
- Financial Engineering with Currency Options
Option Trading Strategies
- Directional vs. volatility trading
- Directional trading strategies
- Near vs. far dates
- Out-of-the-money vs. in-the-money
- Options vs. cash
- Volatility trading strategies
- Directional and volatility trading with currency options
Costs
- New York: $1,950
- London: £1,575.00 (plus VAT)
- Virtual: £1,425 (plus VAT)
Certification / Credits
CPD: 14 hours
Learning Outcomes
By attending this course, you will:
- Explore the principles of forward FX rates and the fundamentals of options
- Obtain an intuitive understanding of option pricing, the different kind of pricing models which are used, and the significance of volatility
- Investigate the behaviour and characteristics of FX options, and how FX options differ from other FX products like forwards
- Understand the primary Greeks, and why they are important for all option users See what differentiates FX options from options on other underliers
- Explore how FX options can be combined in different ways to create spreads, straddles, strangles, and other structures
- Examine how vanilla FX options can be combined to build targeted hedges, or to exploit specific views of the market
- Develop an innovative and pro-active approach to the handling of FX risk management needs
- Obtain first-hand practical experience with computer-based strategy evaluation, graphics, analytics, option pricing, and simulation
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ACF Academy
ACF Consultants are a global leader in providing practical and effective training for financial professionals. Leading banks, companies and financial institutions from all over the world partner with us to develop their people to achieve their goals. They trust our...