# Derivatives at CFA level 1 - best way to prepare?

Things have been rolling with the prep: Ethics, FRA, Equity, Alternative Investments… and then I hit derivatives. Having very little experience with this topic (as compared to virtually all other topics at level 1)… I feel like I hit a wall. I followed the 4+ hour lecture from Elan/Wiley videos on the reading (readings 58 & 59, in particular… reading 57 was fine as the intro) and I was wondering how such a complex topic represents 5% of the exam and wondering if I will ‘get it’.

I haven’t done the CFAI EOCs or blue box as of yet nor the Elan/Wiley EOC questions.

Hoping for input from the AF community for this topic!

Watch IFT’s free videos in youtube. Found it really helpful as he explained it really well.

Read the text. Do practice problems. Try not to refer to formulas when calculating payoffs, breakevens, max/min payoffs.

Anything in particular you ahve trouble with?

Optino B: Consult s2000.

Happily is only 5% lol, guess it were 20%, no no. That 5% means only 6 questions in AM test and 6 in the PM one; and there is only 3 readings, so on average you will encounter 4 questions for each reading in both tests. It is not imposible, and not even hard. At the end you will find them funny and adorable, really.

Read it, do practice problems, check out the answers, and just do your best. Don’t lose sleep over such a small section.

I find that if you are able to think about the strategy on a larger scale (ie. don’t get bogged down by the formulas) everything is much easier to understand.

I don’t recall exactly what was tested on derivatives in level I but that logic helped me through the entire program.

Agreed, I didn’t read Derivatives for L1 and still managed a >70 on the section just by doing the online practice tests and mocks and working my way to the answers. I do with I spend more time on Put-Call Parity as I see that concept carries forward to L2.

I do believe most of the mock questions focus more on theory than specific formulas. You want to have a good understanding of how these securities actually work, and many times you can work back to an answer without knowing the formula.

Hi All - thanks for your advice!

I took into consideration everything on this thread and also from a few others who got through level 1. Given that more ‘memorization’ will occur later on in the process and I wasn’t too thrilled about a portion of these concepts for derivatives, I did the CFAI EOC and Elan/Wiley EOCs to the best of my abilities. Once going through the questions and full debrief of the solutions (for right and wrong answers) + review of theory, it went a lot better in terms of understanding than expected