Derivative risk-mgt strategies

Has anyone come up with a way to memorize all these formulas of max profit, loss etc? I see questions that would require you to memorize.

again, you dont have to memorize, just remember strategies and remember options payoffs, that is it.

not true. Schweser exam 1 afternoon has question that requires knowing the formulas.

false, i got 6/6 on this question and i dont remember formulas

i was talking about those of with an IQ of less than 176.87525652.

Well, you can memorize it but you really have to understand what the strategy is about or else you cannot recall it.

needhelp you just need to remember strategies. Remember for Bull/Bear Spread, Butterfly spread, Straddle. Remember what kind of options you need to buy sell. After that. c = Max(S-K,0) p = Max(K-S,0) if you bought it it, payoff will accrue to you, so it is a + if it is sold it, it is a - same thing for options costs. If you bought an option it is an outflow -> - If you sold it, it is an inflow = +

that helps. thanks.

There are alot of formulas but I can make sense of most of them except the breakeven ones, I have trouble with those. Also, can’t you just guess (educated) and check for max profit/max loss and breakeven if you know the stategy and the profit forumla (which is pretty easy)? I know it may take longer on exam day but if you understand the stategy it should not take long.

I agree with csk that you don’t need to memorize them. Simply know the strategy and what it entails. The likely scenario is that you’d see this sort of question in MC format so you can easily work through the various price options to determine break-even and max profit/loss given the answers from the item set if you can’t determine the answer right away. It may take a few minutes but you should have ample amount of time.