Derivatives are complicated investment products that can be difficult to understand, as their value is derived from other investment products. While there are a number of different types of derivative investment products, this course focuses on options contracts and commodity futures. The material begins with the mechanics and basics of these investments – what they are, how they work, etc. – before moving on to how they are priced, how they are used to hedge positions, how they are speculated with on their own, and related terminology and strategies.

8–1 Explain terminology, characteristics, risks, concepts, and strategies for the use and valuation of various types of option investments.
8–2 Evaluate the effective use of options as speculative investments and as hedging instruments.
8–3 Explain terminology, characteristics, risks, concepts, and strategies for the use of commodity contracts.
8–4 Evaluate investor situations to recommend appropriate hedge positions.

Author: Craig Kinnunen, MS, CFP®

Craig Kinnunen, MS, CFP® is an associate professor at the College for Financial Planning. Prior to joining the College, Craig enjoyed a long and successful career in personal financial planning and wealth management. Craig’s enthusiasm for financial planning extends beyond the classroom, as he also spends time providing pro bono financial education and individual financial counseling to members of the Colorado National Guard. Craig earned a bachelor of science degree in accounting from Northern Michigan University and followed that up with a master of science degree in finance from the University of Colorado in Denver. You can contact Craig at craig.kinnunen@cffp.edu.

Complexity Level: Intermediate