Options & Derivatives

Employee stock options (ESOs) are call options granted by employers that give employees the right to purchase company stock at a fixed strike price. This guide covers vesting schedules, ISO vs NSO tax treatment, exercise strategies, post-termination rules, Section 83(b) elections, and FASB ASC 718 accounting.

Mortgage-backed securities (MBS) are bonds backed by pools of mortgage loans. Learn how securitization works, the differences between pass-through MBS, CMOs, and stripped MBS, agency vs non-agency structures, prepayment risk, and how to analyze MBS pricing and yield.

Commodity futures are standardized exchange-traded contracts for buying or selling physical commodities at a predetermined price. Learn how convenience yield, storage costs, contango, backwardation, and seasonal patterns shape commodity futures pricing.

Exotic options are options with payoff features beyond standard calls and puts. This guide covers the major types (barrier, Asian, binary, lookback, and more), why institutions use them, how they are priced, and how they compare to vanilla options.

A cash-secured put is an income-generating options strategy where you sell a put option while holding enough cash to buy the stock if assigned. Learn how it works, the payoff structure, a detailed AAPL example, and common mistakes to avoid.

A butterfly spread is a three-strike options strategy that profits when a stock settles near a specific price at expiration, offering a high reward-to-risk ratio with defined maximum loss.

A calendar spread buys a longer-dated option and sells a shorter-dated option at the same strike price, profiting from the faster time decay of the near-term option when the stock stays range-bound.

The wheel strategy is a systematic options income strategy that cycles between selling cash-secured puts and covered calls, generating premium income at every phase of the cycle.

Open interest measures the total number of outstanding option contracts at a given strike and expiration. Learn what open interest means, how it differs from volume, and how to use it for strike selection, liquidity filtering, and trade confirmation.

The iron condor is a defined-risk options strategy that profits when the underlying stays within a price range.

Learn how strangle options work including long and short strangle payoff diagrams breakeven calculations and strangle vs straddle comparison.

The Black-Scholes model is the most famous options pricing formula in finance. Learn the BSM formula for European calls and puts, understand its assumptions, work through a step-by-step example, and explore the Greeks it derives.