Upper & Lower Bounds of Options Explained | CFA Level 1 Derivatives

Upper and Lower Bounds for Options is one of the most important foundational concepts in option pricing under the CFA Level 1 Derivatives curriculum. In this lecture, Professor CA Nikhil Jobanputra explains the logical limits within which option prices must lie, based on no-arbitrage principles. The session covers: ✔ Upper bound for European Call Options ✔ Upper bound for European Put Options ✔ Lower bound for Call Options using no-arbitrage portfolio ✔ Lower bound for Put Options using replication logic ✔ Understanding present value of strike price ✔ Key formulas every CFA Level 1 student must remember By the end of this session, you will clearly understand: Why Call Price ≤ Stock Price Why Put Price ≤ Present Value of Strike The minimum theoretical value of options The arbitrage reasoning behind option pricing limits These bounds form the foundation for Black-Scholes and other option valuation models. 🎓 For CFA Level 1 Students Important formulas covered: Call Lower Bound C ≥ max [0 , S − PV(X)] Put Lower Bound P ≥ max [0 , PV(X) − S] Upper Bounds Call ≤ S Put ≤ PV(X) 📚 Instructor: CA Nikhil Jobanputra Finance Faculty | CFA | CA & CMA Final 🌐 Website 📌 Recommended For CFA Level 1 Students Derivatives learners Finance students preparing for exams Anyone learning Option Pricing Fundamentals We simplify your financial learnings. ►►CFA Level 1: ►►CA Final AFM Courses: ►►CMA Final SFM Courses: ►►Subscribe here to learn more of Strategic Financial Management: ►►Read more on our website: ►►About CA Nikhil Jobanputra: CA NIKHIL JOBANPUTRA is a highly respected & accomplished professional educator with a demonstrated trajectory in the field of training CA, CFA and CMA students, known for his proficiency, dedication, and commitment in delivering top quality professional training and proven results. With over 20 years of experience, he has coached over 40,000 students across India. His expertise lies in teaching CA, CFA and CMA students, notably in Strategic Financial Management, Financial Reporting, IFRS & Ind AS. He realized his penchant for teaching in 1997, when he started his Institute, post that there was no stopping him and the journey still continues as a Founder Faculty of Incito Academy. He is the founder and core faculty of SFM Guru, an institution that is known for making the learning experience interesting and engaging. #cfa #cfalevel1 #cafinalsfm #sfm #cmafinalclasses #optionstrading #options #cafinalafm #Derivatives #Options #OptionPricing #UpperBound #LowerBound #CallOption #PutOption #FinanceEducation #NikhilJobanputra #SFMGuru