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Advanced Equity Derivatives

2 Part Course  |  Learn and develop a thorough understanding of the applications of equity derivatives

Advanced Equity Derivatives Online Course

A one-day course presented in two half-day live webinars from 9:30am to 1:00pm UK time

This Advanced Equity Derivatives training course is a 'must-know' for:
  • Asset Managers
  • Junior Traders
  • Middle Office
  • Compliance
  • Risk
  • Audit
  • Anyone wishing to understand the Equity Derivatives Markets

  • A practical insight into how Equity Derivatives are used in the “real world”
  • Examples of how Market participants use Futures and Options to Speculate and Hedge Positions
  • Case studies showing how traders use equity derivatives Options to create higher yields and to enter the market at market-beating levels
  • Yield Enhancement strategies – selling covered calls
  • A practical understanding of the impact that CVA has on Equity Derivatives
  • Quanto Equity Index Swaps and their role in creating synthetic portfolios
  • The life cycle of CFDs and ETFs. From pricing to margining and credit risk
  • Collateral Management from ISDA Master Agreements, through CSAs and onto the Collateral management itself
  • Understanding how equity derivatives Options are Traded by Banks and the strategies used to make money or hedge risk
  • The role of equity derivatives structuring of products and how they make money
  • Volatility trading – Equity options trading and Delta hedging strategy in practice. Having long and short volatility positions and calculating potential profits.

  • To provide a complete understanding of the properties and risk profiles of equity derivative products
  • To provide participants with a thorough understanding of the applications of equity derivatives so that they have the ability to advise their clients on strategies that may be used to meet specific investor requirements
  • To provide participants with a thorough understanding of equity derivatives pricing techniques. This will give participants a good understanding of whether the prices quoted are fair
  • To provide participants with a thorough understanding of the equity derivatives risk management processes and techniques used in equity derivatives. This will allow participants to explain risk-reward expectations to investors and better manage risks in their own portfolios.
  • To provide participants with a thorough “hands-on” experience in creating options strategies and understanding the profit and loss potential of the trades.
  • To explain to participants the full risk profile of Equity Derivatives, including how collateral management works through the process of VaR, marking positions to market and margin management. This will give prime brokers and investors a better understanding of the role of collateral in risk reduction.

Day One

Module 1 – Practical Uses and Risks of Using Equity Futures (and Forwards). This module examines how Futures are priced, traded and used to create synthetic positions and hedge risk.

How are equity derivatives priced?

Futures contracts

  • Life Cycle of a Futures Trade
    • Placing the trade, Execution, Give Up’s, Brokers role, Margining, Cash flow etc
    • Leverage and Risk
  • Futures and Forwards price formula
    • Cash and Carry
    • Contango and Backwardation
    • Why dividends matter! Calculating the Future/Forward Index Price
  • Derivative Products
    • Futures
      • Stock Index Futures
      • Single Stock Futures
    • Forwards
    • Stock index futures
      • Asset Allocation - Used by traditional fund managers to change the asset allocation
      • Hedging Risk – traditional fund managers cover the short term risk
    • Calculating the Hedge Ratio
      • Long and short speculative positions - Trading

Exercise for Module 1

Participants will be asked to calculate the correct positions for varying strategies and the potential profit and loss given various scenarios.

Module 2 – Other Delta One Derivative Product

  • CFDs
    • Life Cycle
    • Trading for Profit
  • ETFs
    • Construction
    • Risk Management
  • Stock Loans
    • Mechanics / Fee Income
    • Dividend Arbitrage
  • Equity Swaps
    • Total Return Swaps (TRS)
    • Examples of Equity Swaps Uses
    • Portfolio Creation and Hedging
    • Pairs Trading

Case Study: Quanto Equity Swap. Creating a EUR denominated
Easter European Equity Basket Return. We examine the how to create this product, the pricing and the risks involved

Module 3 - How are equity derivatives risk managed? - CVA (Credit Valuation Adjustment) and collateral management

Including examples of mark-to-market. This module provides an in-depth analysis of risk and collateral management to ensure that participants understand how risk is reduced.

  • Equity Delta 1 instruments
  • VaR
  • Market Risk Management
  • Trade execution in the OTC (Over-the-counter) Market
  • Mark to market
  • Counterparty Credit Risk Exposure
  • How CVA affects pricing
  • ISDA / CSA (credit support annexe) Agreements
  • Collateral Management
  • Margins
  • Haircut
  • MTAs (Minimum Transfer Amounts)
  • Independent Amounts etc

Exercise for Module 3

Particpants are asked to look at Corporate Equity Derivatives trades and calculate the Collateral Calls required to ensure the reduction in Counterparty Risk

Day Two

Module 4 - Pricing Options

  • Options Pricing Black Scholes
    • Overview of the Model and its practical uses in pricing options
    • Formulas
  • The Greeks
    • Delta, Gamma, Vega, Theta and Rho
      • How to use them in Trading and Hedging

Case study and Exercise: Delta Hedging startegy in Practice. -We look at a short Equity option position and hedge the position over a period of days. Maintaining a delta-neutral position while identifying the changes in Vega, Gamma and Theta

  • The Volatility Curve….Smile and Smirk
  • Skew and Kurtosis
  • Term Structure of Volatility
  • Using Equity Options
    • Leveraging
    • Hedging
      • Buying Protective Puts
      • Collars
    • Basic Options Strategies
      • Yield Enhancing – Selling Covered Calls
      • Creating Cheap Entry-Level Trades
      • Bull Call and Bear Put Spreads
      • Straddles, Strangles and Butterflies
      • Calendar Spreads
      • Covered Calls

Exercise for Module 4

For each Scenario “real life” single stock option prices are used and the participants practice creating the strategy and discussing with the Equity Derivatives group and trainer the payoff profile.

Module 5 – More Complex Equity Option Strategies

  • Cheap Entry – Using Options to Buy into the equity derivatives market
  • Call Backspread
  • Iron Corridor
  • Christmas Tree
  • Bachspreads with Puts
  • Risk Reversals

Exercise: Participants are asked to consider various market scenarios and must decide which Equity Derivatives strategy to use and calculate the price and potential p/l on the trade.

  • Trading Volatility
    • …Long / Short Vol Positions
    • 25 Delta Risk Reversals
    • Trading the volatility Skew

Exercise: Working in Teams participants review current option pricing in the market/ Based on their own views they create option volatility strategies that they believe have good cost /reward ratios. 

Module 6 - Structured products

  • Principal Protected v Principal at risk.
  • Convertibles / Reverse convertibles
  • Path Dependant Options
    • Barrier
    • Reverse convertibles
    • Binary

Exercise: Create simple Equity structured products

  • Principal Protected Equity Products
  • Knock-In / Knock out Strategies

The Advanced Equity Derivatives course trainer worked in Investment Banks including HSBC and Bank of Montreal for nearly 20 years. During this time, he worked in Operations and then as a trader, running books in FX, bonds and derivatives.

The trainer has run courses all over the world including Amsterdam, Dublin, London, New York, Hong Kong, Singapore, Jakarta, Johannesburg, Delhi, Accra, Johannesburg etc.

The trainer delivers courses which focus on providing a practical and in-depth understanding of the markets from a Trading, Operations and Risk viewpoint. His courses are interactive and stimulating, offering delegates the opportunity to participate in an environment which encourages free discussion of the real issues faced in the workplace.

In addition to his training activities, he has undertaken various consultancy projects, such as an in-depth collateral risk assessment at a major European Investment bank.

The trainer held the position of Non-Executive Director of Cazenove’s Derivative Oversight Committee for many years. Acting as a member of the committee in a general consultative capacity to assess the firm’s derivative capabilities and risks.

The trainer has also presented at JPMorgan Forums in London, speaking on topics such as the Benefits and Risks of Derivatives. He along with representatives from the FSA, law firms, hedge funds etc. were asked to give their views on the risks of derivatives to 150 / 200 Directors and senior managers from the top investment firms in the UK.

This Advanced Equity Derivatives training course has been designed to provide a thorough overview of equity derivatives products, pricing, risk management and applications. We will use real-life case study examples to illustrate the techniques and strategies that are used by both the “buy-side” and “sell-side”.

Participants will require laptops with MS Excel for the exercises and case studies.

Number of places:
Part 1
Number of places:
Part 2

£ 795.00

Per participant per part

Discounts available:

Book multiple places on both parts in one order for the below discounts:

  • 2+ places at 40% less = £ 954.00
    per person
  • 4+ places at 50% less = £ 795.00
    per person
  • 6+ places at 60% less = £ 636.00
    per person
  • 9+ places at 70% less = £ 477.00
    per person
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