Derivatives Foundation case studies, worked step by step

Cases
100
Traced to a firm
12
Topics
12
Hard
29
Topic
All topicsMargin, clearing and risk limits8Market making and trading scenarios8Option pricing and arbitrage checks8Option strategies and trade ideas10Hedging with futures8Forwards, futures and arbitrage8Volatility trading8Interest rate derivatives9Structured products and client solutions7Currency derivatives and corporate FX hedging9Credit derivatives and counterparty risk7Greeks and managing an options book10
Level
AnyWarm upCoreHard
Source
AnyReported at a firmStandard
Showing 1–10 of 12 · filtered from 100Clear filters
  1. 004Pitch a stock on a margin recovery thesis and express it with a call spread sized so the worst case is 0.5% of a Rs 100 crore book. Show the payoff at three prices.Option strategies and trade ideasHardMorgan StanleyTokyo · 2025BarclaysNew York · 2026ScotiabankToronto · 2025
  2. 021In a ten-minute group exercise, pitch a trade on two steel makers: one has options at 28% implied against 35% realised, the other 40% implied against 30% realised. Vega is Rs 12,000 and Rs 9,000 a lot. Build a vega-neutral trade and say what would make it lose.Option strategies and trade ideasHardMorgan StanleyTokyo · 2025
  3. 022On a Rs 1,000 stock, compare a covered call, a protective put and a long straddle over three equally likely outcomes of 850, 1,000 and 1,150. Which makes more money on average, which has the more volatile P&L, and where does each come from?Option strategies and trade ideasCoreSusquehanna International GroupPhiladelphia · 2025
  4. 024An airline hedging 60,000 tonnes of jet fuel with 1,000-barrel crude futures gets a regression of jet fuel price changes on crude futures changes: slope 0.71, standard error 0.08, R-squared 0.64, 36 observations. Read it, set the hedge, and say how much risk it removes.Hedging with futuresCoreWolverine TradingChicago · 2016
  5. 051A covered call overlay that added 2.1% a year in a ten-year backtest lost about 1.5% in its first live year. The backtest filled at mid, the live market was 2 vol points wide, volatility halved and one month rallied 8%. Where did the gap come from?Volatility tradingHardJump TradingChicago · 2018
  6. 070A stock joins the Satpura 50 and index funds must buy about Rs 900 crore at the close on the effective date, against average daily trading of Rs 150 crore. A facilitation desk can pre-position or offer the funds a guaranteed close. Size the liquidity problem and the desk's risk, and say what happens if the stock falls 4% after inclusion.Market making and trading scenariosHardMizuhoHong Kong · 2024MizuhoHong Kong · 2024MizuhoHong Kong · 2024
  7. 071After selling calls to a client, your desk must buy 2 lakh shares to hedge delta. Mid is 500.5 and the offers are 20,000 at 501, 40,000 at 502, 60,000 at 503 and 80,000 at 505. What are the average fill and the slippage if you sweep the book, and what else could you do?Market making and trading scenariosCoreTower Research CapitalNew York · 2020
  8. 073A market maker quotes a stock's 500 call at 12.00 bid, 12.40 offered, lot 100. Over the day it buys 600 contracts on the bid and sells 400 on the offer; the option's delta is 0.5. What spread did it earn, what inventory is left, and how does it hedge it?Market making and trading scenariosWarm upSusquehanna International GroupBala Cynwyd · 2025
  9. 080A stock halts at 300 on a takeover rumour with a bid of 360 in the air. You are short 500 lots of one-month 320 calls. How do you quote at the reopen, and what do you stand to lose or make?Market making and trading scenariosHardOld Mission CapitalChicago · 2020
  10. 081A stock at 400 should drift to 420 to 440 over two months, not beyond. Buy the 400 call at 14, buy the 400/440 call spread at 10, or sell the 380 put at 6? Pick one.Option strategies and trade ideasCoreOld Mission CapitalChicago · 2025

Company names and figures are illustrative.