Chapter 4: Options and Contingent Claims

In this section

• Call and Put Options: Definitions and Payoffs
  Call and Put Options: Definitions and Payoffs (CFA Level 1): Key Building Blocks, Call Option Payoff, and Visualizing a Long Call Payoff. Key definitions, formulas, and exam tips.
• Intrinsic Value, Moneyness, and Time Value
  Intrinsic Value, Moneyness, and Time Value (CFA Level 1): Intrinsic Value, Moneyness, and Time Value. Exam-focused explanations with key terms and takeaways.
• European vs. American Options
  European vs. American Options (CFA Level 1): Defining European and American Options, Real-World Impact of Early Exercise, and Why the Distinction Matters for Pricing. Key definitions, formulas, and exam tips.
• Covered Calls and Protective Puts
  Covered Calls and Protective Puts (CFA Level 1): Covered Call Strategy, Core Concept, and Rationale and Basic Payoff. Key definitions, formulas, and exam tips.
• Option Strategies and Payoff Diagrams
  Option Strategies and Payoff Diagrams (CFA Level 1): Bullish Strategies, Long Call, and Short Put. Exam-focused explanations with key terms and takeaways.
• Exotic Options (Binary, Barrier, Asian)
  Exotic Options (Binary, Barrier, Asian) (CFA Level 1): Binary (Digital) Options, Concept and Payoff, and Uses and Applications. Key definitions, formulas, and exam tips.
• Exchange Options and Compound Options
  Exchange Options and Compound Options (CFA Level 1): Exchange Options, Key Concepts in Exchange Options, and Margrabe Model. Key definitions, formulas, and exam tips.
• Volatility Trading with Options
  Volatility Trading with Options (CFA Level 1): Concept of Volatility in Option Pricing, Why Volatility Matters, and Differences Between Implied and Realized Volatility. Key definitions, formulas, and exam tips.
• Greek-Based Hedging Strategies
  Greek-Based Hedging Strategies (CFA Level 1): Delta: Price Sensitivity and Practical Delta Hedging. Exam-focused explanations with key terms and takeaways.
• Lookback, Shout, and Cliquet Options
  Lookback, Shout, and Cliquet Options (CFA Level 1): Introductory Perspective, Lookback Options, and Types of Lookback Options. Key definitions, formulas, and exam tips.
• Chooser and Rainbow Options
  Chooser and Rainbow Options (CFA Level 1): Chooser Options: Concept and Mechanics, Informal Pricing Intuition, and Practical Uses. Key definitions, formulas, and exam tips.
• Employee Stock Options
  Employee Stock Options (CFA Level 1): Structure and Vesting, Valuation for Accounting Purposes, and Common Valuation Models. Key definitions, formulas, and exam tips.
• Index and Basket Options
  Index and Basket Options (CFA Level 1): Key Features and Terminology, Why Use Index and Basket Options?, and Typical Index Option Payoffs. Key definitions, formulas, and exam tips.
• Structured Warrants and Warrants vs. Options
  Structured Warrants and Warrants vs. Options (CFA Level 1): What Are Warrants?, Use of Warrants as Sweeteners, and Dilution Factor. Key definitions, formulas, and exam tips.
• Real Option Approaches in Corporate Decision-Making
  Real Option Approaches in Corporate Decision-Making (CFA Level 1): Key Concepts of Real Options, Definition and Background, and Traditional NPV vs. Real Options. Key definitions, formulas, and exam tips.
• Spread Options on Commodity Price Differences
  Spread Options on Commodity Price Differences (CFA Level 1): Background on Spread Options, Terminology, and Common Commodity Spread Options. Key definitions, formulas, and exam tips.
• Volatility Targeting Strategies Using Options
  Volatility Targeting Strategies Using Options (CFA Level 1): Key Concepts and Definitions, Volatility Targeting, and Implied vs. Realized Volatility. Key definitions, formulas, and exam tips.