Dear FRM Candidate, I hope your preparation has ramped up by now and the previous set of sheets helped you get a better idea about efficient frontier, correlation concepts and regression analysis.

This time in the Xcel FRM Series, we will focus on Option Spreads and Strategies in Financial Markets and Products. This session is highly testable. You are sure to get around 2-3 questions from these topics in your final exam.

Put-Call Parity: Understand the derivation of the put-call parity

Next we have several sheets that give the pay-out of different spreads and strategies using options.

1. Straddle, Strap, Strip

2. Strangle

3. Bear Spread

4. Long Butterfly Spread using Call Options and Put Options

5. Short Butterfly Spread with Call Options

6. Bull Spread

Please remember, we use European Options for Option Strategies, otherwise the early exercise of American Options can lead to different payoffs!

Feel free to share these sheets with your friends!

Stay tuned for Day 3 of more sheets on Financial Markets and Products and Valuation and Risk Models.

Till then, happy studying!