Derivatives at CFA level 1 - best way to prepare?

[blitzspades]

Things have been rolling with the prep: Ethics, FRA, Equity, Alternative Investments…. and then I hit derivatives. Having very little experience with this topic (as compared to virtually all other topics at level 1)… I feel like I hit a wall. I followed the 4+ hour lecture from Elan/Wiley videos on the reading (readings 58 & 59, in particular.. reading 57 was fine as the intro) and I was wondering how such a complex topic represents 5% of the exam and wondering if I will ‘get it’.
I haven’t done the CFAI EOCs or blue box as of yet nor the Elan/Wiley EOC questions.
Hoping for input from the AF community for this topic!

 

[jordanesque23]

Watch IFT’s free videos in youtube. Found it really helpful as he explained it really well.

 

[dwheats]

Read the text. Do practice problems. Try not to refer to formulas when calculating payoffs, breakevens, max/min payoffs.
Anything in particular you ahve trouble with?
Optino B: Consult s2000.

 

[Harrogath]

blitzspades wrote:
…and I was wondering how such a complex topic represents 5% of the exam and wondering if I will ‘get it’.

Happily is only 5% lol, guess it were 20%, no no. That 5% means only 6 questions in AM test and 6 in the PM one; and there is only 3 readings, so on average you will encounter 4 questions for each reading in both tests. It is not imposible, and not even hard. At the end you will find them funny and adorable, really.

 

[Cory688]

Read it, do practice problems, check out the answers, and just do your best. Don’t lose sleep over such a small section.

 

[M4tt30]

I find that if you are able to think about the strategy on a larger scale (ie. don’t get bogged down by the formulas) everything is much easier to understand.
I don’t recall exactly what was tested on derivatives in level I but that logic helped me through the entire program.

 

[Yayyywork]

M4tt30 wrote:
I find that if you are able to think about the strategy on a larger scale (ie. don’t get bogged down by the formulas) everything is much easier to understand.
I don’t recall exactly what was tested on derivatives in level I but that logic helped me through the entire program.

Agreed, I didn’t read Derivatives for L1 and still managed a >70 on the section just by doing the online practice tests and mocks and working my way to the answers. I do with I spend more time on Put-Call Parity as I see that concept carries forward to L2.
I do believe most of the mock questions focus more on theory than specific formulas. You want to have a good understanding of how these securities actually work, and many times you can work back to an answer without knowing the formula.