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# Category: Level III Derivatives

## Short Butterfly Spread

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but…

## Short Strangle

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but…

## Inverse (Short) Straddle

If you haven’t read the article on option strategies in general, that’s a good place to start, then return here. In particular, if you haven’t read the warning about calculating profit that appears at the end of that article, you should go read it now; the way I’m calculating the profit here is correct, but…

## Option Greeks

The option Greeks – delta, gamma, theta, vega, and rho – refer to sensitivities of the price of an option to various underlying variables. Here, we’ll be talking about options on stocks, though the discussion would be equally appropriate for options on, say, commodities. It would not be appropriate for a discussion of options on…

## FX Swaps

Let’s start by addressing the elephant in the room: the name “FX swap” is just plain weird. This isn’t a swap in any normal sense of the word swap: it isn’t an exchange of cash flows at some predetermined future date(s). An FX swap is nothing more nor less than rolling over an expiring currency…

## Variance Swaps

Variance swaps more closely resemble forward contracts – or forward rate agreements (FRAs) – than they do swaps (e.g., plain vanilla interest rate swaps, or equity swaps). Whereas most swaps have more than one payment, variance swaps (and forwards, and FRAs) have a single payment. However, given the penchant of finance folks to ascribe inaccurate…

## Short Bearish Seagull Spread

## Long Bearish Seagull Spread

## Short Bullish Seagull Spread

## Covered Call