Exchange traded options - part 2
Taught by Ben Wilson · AI tutor support included
You'll learn how to calculate exchange traded options on interest rate futures, a key hedging technique for managing interest rate risk.
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In this lesson
- 0:00 Exchange traded options calculation overview
- 4:03 Determining puts versus calls for savers
- 4:12 Calculating number of option contracts needed
- 4:41 Computing premium fees and costs
- 6:06 Working out interest on underlying transaction
- 7:00 Deciding whether to exercise options
- 8:22 Calculating net position and effective rate
- 9:36 Key takeaways and common pitfalls
About this lesson
This video walks you through a seven-step methodology: selecting the right contract date, deciding whether you need puts or calls (remembering that options on IRFs work in reverse—savers need calls, borrowers need puts), calculating the number of contracts required, working out your premium payment, determining interest on your underlying transaction, deciding whether to exercise, and finally calculating your net position. Using a practical worked example, you'll see how to apply premium tables, time-apportion annual percentages correctly, and handle the calculations that often trip students up. By following this structured approach consistently, you'll build confidence in tackling exchange traded options questions in your exam.
Duration: 11m
Transcript
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