28d • 💻 Technical Skills
Valuation of Commodity Options - New Course
Online Course 5.20 is Now Live in the Classroom!
The course includes a PowerPoint presentation, full Python implementation and many hours of video lectures. It is a beginner-friendly course on the valuation of Commodity Options (like options on crude oil), including full Python implementation.
No stochastic calculus, and no fancy "martingale" mathematics. Just simple, practical language, explaining exactly how it is used in practice, in finance.
Banks like JPMorgan use these exact models to help oil companies guarantee their income, even if oil prices crash. On the other side, oil refineries use this same math to lock in cheap fuel prices.
What we need to remember (also great for interviews): When a company exercises a Commodity Option, it doesn't get the commodity (e.g. oil) immediately. Rather, it receives a Futures Contract. Once that contract expires, it then receives the commodity ( crude oil). So: Option --> Futures --> Commodity.
The attached cheat sheet compares the two main pricing models in energy finance:
- Black-Scholes: Used for Energy Equities (Stocks).
- Black-76: Used for Commodities (Futures).
What’s Inside Course 5.20:
- Foundations: Spot Price vs. Futures Price vs. Strike Price.
- The Math: Calculating "Premium" using the Black-76 Model.
- The Code: Full Python implementation for pricing Call and Put options.
- Valuation: Understanding Intrinsic vs. Extrinsic (Time) Value.
- Mechanics: American vs. European options and Physical Settlement.
- Real World: How an Option becomes a Future, and how a Future becomes Oil.
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Valuation of Commodity Options - New Course
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