Learn. Commodity Options Trading & Risk Management ORM2. Commodity Derivatives Strategy

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1 Learn Commodity Options Trading & Risk Management ORM2 2 days of intensive and comprehensive options/risk management training with practical analysis of option trading strategies and risk management with an energy/soft commodities perspective Limited to very small class size to maximise learning potential Option valuation Commodity options risk management Commodity options trading strategies Managing your option portfolio Modelling spreadsheets provided for you to keep Commodity Derivatives Strategy Course leader: Neil Schofield, B.Sc, MBA, FCIB, DipFS October 14/15, 2015 Geneva, Switzerland

2 Commodity Options Trading & Risk Management for Traders ORM2 About this training course: This course provides delegates with a comprehensive and practical analysis of option trading and risk management from a commodity perspective. Participants are assumed to be conversant with basic option terminology About the Course Director, Neil Schofield, BSc, MBA, FCIB, DipFS: Neil is Managing Director of a UK-based firm that specializes in providing training in financial markets and all of the major asset classes and their respective derivative products. He is also a Visiting Fellow at the ICMA Centre. Previously, he was Global Head of Financial Markets training at Barclays Capital. Neil started his training career at Chase Manhattan Bank, where he was employed as an internal auditor for nine years. During this time he conducted numerous internal and external training seminars with clients including the Bank of England and the Federal Reserve System in the USA. He has also held positions with Security Pacific Hoare Govett (now trading as Bank of America) and Lloyds Banking Group. He holds a BSc in Economics from Loughborough University and an MBA from Manchester Business School. He was elected as a Fellow of the IFS School of Finance (formerly the Chartered Institute of Bankers) in Neil is also author of the books Commodity Derivatives published in 2007 & Trading - Relative Value Guide published in He is currently working on two new texts trading inflation and equity derivatives: markets and applications Ask about running this course in-house Tel: +41 (0)

3 AGENDA: October 14/ Review of fundamentals Recap of option terminology Intuitive approach to option valuation Principles of Black Scholes Merton pricing Pricing options on commodities using the Black (1976) model. Principles of binomial pricing Put call parity Option risk management Delta - Delta and time to expiry - Delta and implied volatility Gamma - Gamma and the underlying price - Gamma and implied volatility - Gamma and time to expiry Vega - Vega and the underlying price - Vega and time to expiry - Vega and implied volatility Theta Gamma vs. theta - Theta and the underlying price - Theta and implied volatility - Theta and the time to expiry An introduction to option trading strategies Managing delta and gamma Pin risk Directional strategies - Bull / bear spreads Volatility strategies - Straddles Managing an option portfolio Volatility smiles Volatility skews - Precious metals - Energy markets - Industrial metals - Agriculture Why do smiles and skews exist? - Fat fails? - Trader gamma hedging activity of skew - Skew vs. underlying price Describing volatility smiles - Sticky strike - Volatility as a function of the option s strike - Sticky delta - Volatility as a function of the option s delta Volatility term structures - Why does term structure exist? - Term structure vs. underlying price Expressing views on implied volatility Absolute level of volatility - Straddles - High sensitivity: level of volatility - Low sensitivity: dvega/dspot & dvega/dvol Steepness of skew / smile - risk reversals - High sensitivity: dvega/dspot - Low sensitivity: level of volatility & dvega/dvol - Concept of skew theta Convexity of skew / smile - Butterflies - High sensitivity: dvega/dvol - Low sensitivity: level of volatility & dvega/dspot Web:

4 Premium at Expiry Premium Prior to Expiry Delta Gamma Theta Vega Rho Options risk management spreadsheet modelling applications for you to retain for your own use... This course will include the use of a number of spreadsheet applications, which participants will be able to keep after the course: Vanilla Options Specification Version Type Call Implemented by: Spot Price S Circle of Influence Solutions Strike Price X Expiry (yrs) T Funding Rate r 2.00% 1 Call 1 Gen-BSM Yield b 5.00% 2 Put 2 Black Volatility 20.00% OFF Price 2 Delta Premium Gamma TRUE Forward Theta Vega Greek Sensitivities 6 Rho Delta dvega/dspot Gamma dvega/dvol Theta Vega Rho Axis Setting dvega/dspot dvega/dvol Minimum Maximum Charts Greek Surface OFF Expiry (yrs) Minimum 0.00 Maximum 1.00 Premium Greek Sensitivities The above example shows a vanilla and exotic option pricing spreadsheet which will be used during the course. The spreadsheets will be used to familiarise participants with the intuitive foundations of option valuation & associated measures of option risk management. A multi-asset class structuring spreadsheet for creating hedging and trading strategies will be used to introduce the fundamental rationale for some popular option trading strategies. It will allow the participants to perform what if analysis on a variety of individual option trading strategies. Pricing Screen Game Date 30-Mar-14 Game Day 1 Deal Input 3 Style European Position Long Type Call Strike HKD per Share Notional 1m Shares Maturity 3m Expiry 91 days Expiry Date #NAME? Deal Option Portfolio & Deal Impact Existing Portfolio New Portfolio (incl. Deal) 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, (2,000,000) (4,000,000) Delta Ping An Insurance Game Controls Gamma Vega Spot New Game Initial Cash Flow (2,437,479) HKD Yield 0.81% Premium HKD per Share Volatility 20.00% Forward HKD per Share Net Portfolio Delta 0 Shares Next Trading Day Including this deal #NAME? Shares Funding Rate 0.80% Circle of Influence (COI) Solutions Limited FX FALSE FX Conversion 1 End Game During the course, a portfolio risk management simulation (see above) will be used to create a portfolio of options which will then be analysed with respect to their exposure to implied volatility. The portfolio will include options with different maturities: Long term (options > 1 year) Medium term (options of about 3 month maturity) Short term (options of about 1 week to expiry. This will allow the participant to investigate the way in which the option Greeks of vega, theta and gamma interact.

5 Commodity Options Trading & Risk Management for Traders Geneva, Switzerland Novotel Hotel, rue de Zurich, 1201 October 14/15, 2015 ORM2 Commodity Derivatives Strategy To pay by credit card, please register online at To pay by bank transfer, please register online at or fill out this form, scan it and it to us at VERY SMALL CLASSES: PLACES ARE STRICTLY LIMITED TO TO MAXIMISE LEARNING POTENTIAL Follow GTG online PRICING OPTIONS prices in Swiss Francs (CHF) please tick the appropriate option Standard rate 2650 CHF Additional Multiple delegate booking rate 15% discount (two or more delegates) REGISTRATION Contact Use a promo code if you have one PLEASE NOTE: If you are booking for someone else, then please provide your name and address here, and then their details in the Delegate Details section. Thank you. Contact DELEGATE DETAILS Please Enter the details of the individuals who will be attending the training here: Delegate 1 Organization Postal Address Delegate 2 Delegate 3 NOTES Postal Code Country Telephone No. Fax No. Signature Course fees do not include travel and accommodation. Refreshments and lunch are included. Full administration information, joining instructions and your invoice will be forwarded to you once we receive your registration. For this event taking place in Switzerland, you will be charged Swiss VAT (8%). This course runs from 9.30 am 4.30pm (both days 1 & 2). Cancellation: You may cancel your registration at any time up to three weeks prior to the event without charge & we will refund your registration fee in full, less a small administration charge. If you cancel within three weeks of the event you may transfer your place freeof-charge to a colleague, or you must pay in full. By singing the signature field - you agree to these terms, and register your delegates. WE CAN RUN THIS COURSE FOR YOU IN-HOUSE: CALL US FOR MORE INFORMATION: +41 (0)

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