Derivative Securities: Rapid Fire

What this video covers

• Why a derivative has zero independent value and how its worth is tied entirely to an underlying asset
• The "call up, put down" rule for direction, and how it solves both outlook questions and break-even formulas (strike plus premium for calls, strike minus premium for puts)
• Why buyers hold rights while writers hold obligations, and why only the buyer can exercise
• How standard options differ from rights and warrants on dilution: existing shares change hands with options, but new shares are issued with rights and warrants
• The timing and pricing distinctions between rights (short-term, below-market, anti-dilutive) and warrants (long-term, above-market, dilutive)
• Why futures are standardized, exchange-traded, and cleared by a clearinghouse with no counterparty risk, while forwards are private over-the-counter (OTC) agreements that carry counterparty risk
• Why futures margin is a performance bond not a loan, and why a margin call restores the initial margin level via variation margin
• Why the Commodity Futures Trading Corporation (CFTC) regulates futures, not the Securities and Exchange Commission (SEC), because futures are not securities