Derivatives

Derivatives — options, futures, swaps — are contracts whose value is derived from an underlying asset. They can hedge risk, generate income, or express precise market views. These articles break down how each instrument works, how they're priced, and how to use them responsibly without getting burned by leverage you didn't understand.

160

Articles

Subtopics

All Levels

Skill Range

Options Fundamentals

Options give you the right — but not the obligation — to buy or sell an asset at a specific price before a specific date. These articles cover the basics: calls and puts, how premiums are determined, what intrinsic and time value mean, and how to read an options chain. Start here before diving into strategies.

beginner20 articles

Options Strategies and Greeks

Once you understand individual options, the real power comes from combining them into strategies — spreads, straddles, iron condors, and more. These articles also explain the Greeks (delta, gamma, theta, vega) which quantify how option prices respond to changes in the underlying asset, time, and volatility.

beginner20 articles

Futures and Forwards

Futures and forwards are agreements to buy or sell an asset at a future date for a price agreed upon today. These articles explain how these contracts work, the differences between exchange-traded futures and OTC forwards, how margin and marking-to-market function, and how producers, consumers, and speculators use them.

beginner20 articles

Swaps and OTC Derivatives

Swaps are private agreements to exchange cash flows — most commonly interest rate swaps and currency swaps. These articles explain how OTC derivatives work, why counterparty risk matters, how ISDA agreements standardize terms, and how post-2008 reforms like central clearing have reshaped the swaps market.

intermediate20 articles

Derivative Pricing and Models

How do you price something that derives its value from something else? These articles explore the models behind derivative pricing — from Black-Scholes and binomial trees to Monte Carlo simulation. Understanding pricing theory helps you evaluate whether a derivative is fairly valued and why markets sometimes get it wrong.

intermediate20 articles

Volatility and Exotic Products

Volatility isn't just risk — it's a tradeable asset class in its own right. These articles cover implied vs realized volatility, the VIX, volatility surfaces, and exotic products like barrier options, Asian options, and variance swaps that let sophisticated investors express precise views on market uncertainty.

intermediate20 articles

Risk Management and Hedging

Derivatives were invented to manage risk, and hedging remains their most important application. These articles explain how to use options, futures, and swaps to protect portfolios against adverse moves in price, interest rates, and currencies — and how to evaluate whether the cost of hedging is worth the protection.

advanced20 articles

Operational and Regulatory Considerations

Trading derivatives involves more than market risk — there are margin requirements, clearing obligations, reporting rules, and regulatory frameworks that affect how you can trade and what it costs. These articles cover the operational and regulatory landscape so you can trade derivatives within the rules and manage non-market risks effectively.

advanced20 articles

Popular Articles

Measuring and Reporting Value at Risk

VaR is a quantile loss estimate, not a promise and not a worst-case number. Here is how to calculate it, backtest it, and report it without misleading anyone.

intermediate

Interest Rate and Treasury Futures Primer

Treasury futures are the most actively traded derivatives contracts in the world—14.2 million interest rate futures contracts per day across CME products in 2025, up 4% from the prior year's record...

intermediate

Compliance Testing for Position Limits

Position limit violations are accelerating as an enforcement priority—and the penalties are no longer symbolic. In FY 2024, the CFTC issued 3 position-limit-specific orders in a single quarter, tot...

advanced

Cybersecurity Considerations for Derivatives Teams

On 31 January 2023, traders at 42 firms—ABN Amro, Intesa Sanpaolo, Macquarie among them—arrived at their desks to find that ransomware had bricked ION Cleared Derivatives' platform, forcing entire ...

intermediate

Cross-Currency Swaps and Basis Risk

Every year, corporations and banks route more than $7 trillion in notional through cross-currency swaps, exchanging principal and interest in one currency for principal and interest in another. When these swaps work, they're invisible plumbing. When they break, the cost is immediate and brutal: d...

advanced

Position Greeks vs. Individual Leg Greeks

An iron condor positioned ahead of the February 2018 VIX spike looked perfectly safe on a leg-by-leg review—delta flat, gamma manageable, theta pulling in +$50/day—so the trader left it unhedged ov...

intermediate

Margin Efficiency vs. ETFs or Swaps

Futures require 3–7% margin to control full notional exposure. ETFs demand 50–100%. Swaps sit somewhere in between—but with higher operational overhead. The capital you don't tie up in margin is ca...

intermediate

No-Arbitrage Principles in Derivatives

Learn how replication and funding mechanics enforce no-arbitrage across futures, options, and swaps, including tolerance bands and mispricing controls.

advanced

Stress Testing and Scenario Analysis

Learn how to design and execute stress tests for derivatives portfolios, including historical scenarios, hypothetical shocks, and reverse stress testing.

advanced

Binomial Trees for Option Pricing

Learn how binomial trees price options through recombining nodes, backward induction, and early exercise checks, with practical delta and gamma extraction.

intermediate

Backtesting Pricing Models Against Market Data

Every pricing model is wrong. The question is whether yours is wrong in ways that cost you money. Backtesting—replaying historical market conditions through your model and measuring what it predicted versus what actually happened—is the only systematic way to answer that question. Yet most backte...

advanced

Understanding Moneyness and Delta Exposure

Most options traders can define "in-the-money" and "out-of-the-money" on a quiz. Fewer can tell you their net delta exposure in equivalent shares at any given moment—and that gap is where the real ...

intermediate