Futures and options, without the heavy formulas
Intermediate · Derivatives · no code
Derivatives 1: Futures
The contract that makes you the owner of nothing: how a private agreement between two parties became an off-the-shelf product with a clearing house in the middle, why the price of a future is not a prediction but a financing calculation, what it genuinely costs you to keep a position alive by rolling contracts month after month, and where the leverage behind almost every accident comes from.
Derivatives 2: Options, the mechanics
The family of contracts that breaks the symmetry of the future: what exactly the person paying a premium is buying and what the person collecting it is committing to, how the four basic payoff profiles are drawn with numbers and where each one breaks even, which two pieces an option's price always decomposes into and why one of them evaporates on its own, and the economic identity that ties put, call, share and cash together so tightly that any one of the four can be manufactured from the other three.
Derivatives 3: Volatility
The difference between the movement that has already happened and the one the market is charging for in advance: how a volatility is measured and annualized and what range of movement it really implies, why implied volatility is the price of insurance rather than a forecast and how you can get the direction right and lose money anyway, why protective options have traded dearer since 1987, and what the VIX exactly is, that index they call the fear gauge without it being one.
Derivatives 4: The Greeks
An option's premium moves for several reasons at once, and each Greek isolates one of them: delta as the change per euro of the underlying and why reading it as a probability is an approximation, gamma as the reason a hedge stops hedging exactly when the market speeds up, theta as the daily toll paid by whoever buys convexity and collected by whoever sells it, and vega and rho, which explain how you can get the direction right and lose money anyway.
Derivatives 5: Hedges and strategies
What it genuinely costs to insure a portfolio with a put and why protecting yourself every year comes out dearer than the fall you are protecting against, what you are really selling when you write a call against shares you already own, how a vertical spread caps the outlay in exchange for capping the profit as well, and the four situations in which hedging is a bad idea and cutting the position is the cheapest hedge almost nobody considers.
Derivatives 6: When it goes wrong
The level that teaches the side the money is lost on: why selling naked options pays little for a long time and charges a great deal all at once, how collateral turns into a margin call and a margin call into a forced liquidation at the worst possible price, what four real disasters twenty-three years apart had in common, and what you need to check before opening your first derivative, if you need to open it at all.
Derivatives 7: Volatility as an asset
Where volatility stops being a parameter and becomes the position: why an underlying does not have one implied volatility but an entire curve with a figure per expiry, how to solve for the volatility the market is pricing in between two future dates and why that figure is the only informative one ahead of an earnings release, what it means to buy and sell volatility with a thesis of your own instead of inheriting one by buying an option, and why the VIX cannot be bought and the products that claim to replicate it bleed out month after month.
Derivatives 8: Combined positions
The level where you stop buying single options and start building structures: why a long straddle can lose money even when the market moves in the direction you expected, how a calendar stops being a bet on the price and becomes a bet on the slope of the volatility curve, at what exact moment a capped butterfly turns into a ratio with an open tail nobody has measured, and which particular executioner belongs to each of these positions when the bad day arrives.
Derivatives 9: Derivatives in a real portfolio
The level that brings the previous eight down to a real account statement: why the size of an options position is not the premium paid but the notional it controls and the equivalent exposure delta assigns it today, how the collateral required, the spread and the counterparty all deteriorate together on the same day and for the same reason, how much the full bill for a strategy that rolls positions every month genuinely takes, and when a derivative is the right tool and when it is leverage counted another way, closing the track with its warnings.