book 5 progress is ridiculously slow

it is slow for me because:

it is the thickest

it is on commodity, options, swaps which i am really weak at since lvl 2

it involves tons of formulas and calucational steps, specially with option strategies and swaps

Anyone else feel the same? I do not see many posts on this volume for this year…

agreed, book five took me the longest to get through. It doesn’t help that it’s not that well written, I especially had trouble with reading 38.

Unfortunately this are sections they seem to be testing more of lately, so it’s something you need to have at least a decent understanding of.

Agree, I felt especially R33 a bit vague, grasping the concepts vs. what LOS asking + R33 EOC problems different from the usual style. But then the material for R32 & R33 taken from some other book, haven’t read other material by the same author.

I felt L2 forwards material was better - pretty straightforward, well explained.

sentiments shared, i’ve got to get through that last study session this weekend because it’s taking way too long. my formula sheet is ridiculous for book 5.

“it involves tons of formulas and calucational steps, specially with option strategies and swaps”

My approach in this regard is going to focus on the relative advantages of the strategies, rather than crunching the numbers in these and other longer calcs in the curriculum.


  1. Chances are I’m going to eff up any of the more involved calcs during the exam.

  2. Longer calcs will probably be in the PM session, i.e. I can make an educated guess.

  3. There are many more worthy topics from a point perspective to focus on at this point than the mind-numbing derivative stuff. In any event, my sense is that CFAI is more concerned with how you would go about using these instruments in a broader sense.

As Dr. Kuhlman says in the Schweser videos, give CFAI their points, and take yours. I’ll be happy to give CFAI their calc-heavy points!

I totally disagree with this. As a retaker, I felt like a lot of this material was emphasized/integrated into a lot of the questions. It is taking me forever to go back through, but I am certainly picking up more nuances that were obviously missed last year. So, IMHO it may be worth the time because even if you feel you may not get it right at least you won’t get the “WTF are they taking about” feeling that could throw you off kilter.

There are 8 strategies if you include covered calls and protective puts.

memorize 1 every day, write it out few times the next day. cumulatively, we will get them down cold in a about 1 week.

My tip is:

for most of the formulas, memorize the Max Loss.

then you can deduct Vt, profit, max profit, break even points from Max Loss…

a lot of the strategies involves + max loss, - max loss, etc.

I have to add that the way the CFA goes through the options material is terrible. There are so many better books on the subject and I feel like the CFAI makes this unnecessarily difficult. Unfortunately, I did not realize how bad the materials were until I was going through the CAIA after the CFA last year. Night and day.

Although I dont have a memorisation strategy set in stone yet with respect to the option strategies, I think I would go about it this way:

1.There are strategies that i will commit to memory completely in terms of Value,Profit,Max P,Max L, Break points

For me these are Covered Call,Protective Put , Collar and Box Spread.

2.The rest of the option strategies in terms of Value,Profit,Max P, Max L,BPs can be sorta derived from the payoff/profit diagramms and/or certain rules , that to me , are easier to memorise than the actual formulas.

Value=trivial from definition

Profit=trivial (Value-Costs of options)

Max Profit=First look at payoff diagramm, if upside is infinite then stop, we found the answer.If upside is not infinite then max profit=coresponding strike prices + cost of options. (exception being butterfly spread)

Max Loss=Cost of options with reversed signs

Breakeven=specific combinations of strike prices and max Loss.

3.Example : Bull Spread (long call x1+short call x2)

  1. V=max(0,S-X1)-max(0,S-X2)
  2. Profit=V-costs=V-c1+c2
  3. Max Profit=coresponding strike prices and costs. coresponding strikes can be read directly from equation 1,just look at sign before strike prices in first equation (-X1) and -(-X2). This gives X2-X1. Now combine with costs,we yield [X2-X1-c1+c2]
  4. Max Loss=costs with reversed signs=c1-c2
  5. BreakEven=X1+max loss=X1+c1-c2

…So perhaps i just need to remember 4 strategies completely, and the other 4 i could derive with two pieces of info:

  • Definition of strategy
  • Break even points in terms of Max Loss

Still need to test this out though

I think memorizing Max Loss is not sufficient. Spread strategies do not involve owning the asset and all the options are asymmetric payoff. The Max loss is straight forward, sum of all the cash flows spent on your strategy’s long and short options. I say, formula to value the position is important one and easy to remember as well, sum of all your option values (not simple cash flows). Well, you will have to memorize all the options involved in the strategy itself, there directions and relative exercise prices.