Course description
FX Options – Essentials to Exotics
This intensive two-day seminar takes you from the essentials of FX options through to exotics, showing the practical use of FX options, as well as the risk management of an FX options.
After attending the program, participants will have mastered the concepts and practices of FX options, be confident in handling products ranging from vanilla options to exotics, and will return able to make an immediate and effective contribution to the management and control of currency risk through the use of FX options.
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Upcoming start dates
Suitability - Who should attend?
Who Should Attend
Anyone working in FX or currency sales and trading, or those advising clients on managing their FX risk.
Prerequisites
A good working knowledge of the FX spot and forward markets.
Outcome / Qualification etc.
CPD: 14 hours
Learning Outcomes
By attending this course, you will:
- Understand the behaviour and characteristics of options, and how FX options differ from other financial products like forwards
- Explore the practical use of exotic, non-standard, and second-generation options
- See how vanilla and exotic options can be combined to build targeted hedges, or to exploit specific views of the market
- Reconcile the risk-reduction needs of clients buying option products with the risk-management needs of banks selling option products
- Experience the issues arising in the active hedging of derivatives, and the practical problems faced by traders in managing a book of options
- Develop an innovative and pro-active approach to the handling of FX risk exposures
- Gain extensive first-hand experience with computer-based strategy evaluation, graphics, analytics, option pricing, and simulation
Training Course Content
Principles and Characteristics of FX Options
- FX option trading conventions
- An intuitive insight into option pricing
- 💻 FX options pricing workshop
- FX options: American vs. European style
- Call-put parity
- Significance of volatility
- Historic, implied, experienced volatility
- Volatility smiles and skews
- Measures of option price sensitivity – delta, theta, vega, gamma
- 💻 "Greeks" workshop
- Quoting FX options using volatility
- Risk reversals
- Implications from risk reversal prices
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
Delta Hedging – Theory and Practice
- Exactly how delta-hedging works
- Why be delta-neutral?
- Buying high and selling low to achieve delta-neutrality
- The link between delta and gamma
- The cost of being negative gamma
- The benefit of being positive theta
- The link between gamma and theta
- The trade-off between implied volatility and experienced volatility
- The link between theta and vega
- "Easy" and "difficult" options to hedge
- Gamma hedging
- Transactions costs
- How often do we re-hedge?
- Market gapping problems
- P&L risks while running an options book
- The cost of hedging and running an options book
- 💻 Delta-hedging simulation
Overview of Exotic FX Options
- Introduction to exotic options
- Path-dependent options
- Options with step-like (singular) payouts
- Correlation products
- Other exotics: compound and forward-start
Barrier Options
- Up, down, knock-in, and knock-out – variations on a theme
- Barriers with rebates
- Normal and partial (window) barriers
- Single, double, and multiple barriers
- Outside barriers
- Curvilinear barriers
- Practical issues in monitoring the barrier
- Practical applications for barrier options in hedging financial risk
- 💻 Barrier Option Pricing Workshop
- 💻 Using FX barrier options
- 💻 Risk characteristics of barrier options
Digital Options and the "Digital Cookbook"
- One-touch, all-or-nothing – variations on a theme
- Cash-or-nothing and asset-or-nothing
- Digital options as a basic building block
- Creating a pay-later option
- Creating a reverse contingent option
- Creating a "money back" option
- Creating a stepped-premium option
- Creating enhanced-rate synthetic forwards
- 💻 Digital Options Pricing Exercises
- 💻 Using Pay Later Options
- 💻 Risk characteristics of digitals
Putting it All Together
- Review of structures, barriers, and digitals
- Combining exotics with vanilla options
- Embedding options within a package
- Designing innovative solutions
- Reducing the cost of client hedges
- 💻 Exotic options structuring exercise
Why choose ACF Academy
Over 100,000 professionals trained globally
Award-winning practical financial simulations
Consistently high ratings
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Expenses
- London: £1,825 (plus VAT)
- New York: $2,300
- Virtual: £1,575 (plus VAT)