Options & Derivatives

Options give portfolio constructors something linear instruments cannot: payoffs that bend. That flexibility comes with its own vocabulary and mechanics — pricing models, the Greeks, moneyness, and the structures practitioners actually trade. This guide collects every Knowledge Hub entry on options and derivatives, from first principles (what a call is worth and why) through the second-order behaviour that drives real P&L.

Each entry follows the same discipline: a precise definition, the formula where one exists, a worked example, and a section on how the concept fails in practice. Written and reviewed by the EC Assets Volatility & Derivatives desk.

All entries in this guide

• Black-Scholes Model — The Black-Scholes model is a continuous-time framework that prices European options by assuming the…
• Covered Call — A covered call pairs a long position in an asset with a short call written against it, converting some of…
• Delta — Delta is the first-order sensitivity of an option's price to a one-unit move in the underlying asset. It…
• Gamma — Gamma measures how an option's delta changes as the underlying price moves. It is the second derivative of…
• Gamma Scalping — Gamma scalping is holding a delta-hedged long-gamma (long options) position and re-hedging as the underlying…
• Iron Condor — An iron condor sells an out-of-the-money put spread and an out-of-the-money call spread at once, collecting…
• Moneyness — Moneyness describes where an option's strike sits relative to the spot price - in, at, or out of the money -…
• Open Interest — Open interest is the total number of futures or option contracts that exist at any given time - contracts…
• Put-Call Parity — Put-call parity is a model-free no-arbitrage relationship that fixes the price gap between a European call…
• Rho — Rho measures how much an option's price changes when the risk-free interest rate moves by one percentage…
• Second-Order Greeks — Second-order Greeks measure how the first-order Greeks themselves change. Vanna is delta's sensitivity to…
• Straddles and Strangles — A straddle buys a call and a put at the same strike; a strangle buys them at different out-of-the-money…
• Theta — Theta measures the rate at which an option loses value as time passes, all else equal. It is the cost of…
• Vega — The first-order sensitivity of an option's price to a one-percentage-point change in implied volatility…

More topic guides

• Volatility
• Macro & Multi-Asset
• Performance Measurement
• Risk Management
• Hedge Funds & Alternative Strategies

Browse the full Knowledge Hub · Produced by EC Assets Research