Options Fundamentals — Lecture Notes
Core mechanics of call and put options through payoff structures at maturity
The latest lecture notes for the Derivatives and Fixed Income course (Fall 2025) are now available. This session introduces the foundations of options.
We focus here on payoff structures at maturity, setting aside intermediate valuation techniques (which depend on other multiple factors, such as time, volatility, and rates) for later lectures.
Covered topics include:
🎯 Definitions of call and put options (European and American styles)
📈 Payoff and P&L formulas for long and short calls and puts
📉 Graphical analysis of profit/loss profiles
🧠 Analogies to aid conceptual understanding (e.g., concert tickets and car insurance)
📊 A summary table comparing the four basic positions
🧩 Preview of the determinants of option prices
These notes are part of the PGE M1 Quantitative Finance track at SKEMA Business School.
