Course outline: Understanding Futures & Options

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Capital Markets & Derivatives Training specialise in developing and delivering bespoke in-house training courses and programmes. This sample course outlines the content and structure of a typical course.

Objective: This course sets out to provide delegates with a good understanding of how the futures and options markets work, together with the functions of the clearing house.
Course aims:
  • Examine the operations of the Exchanges
  • Study the main exchange traded products
  • Calculate how the margining system works for futures and options
  • Understand how different futures and options are priced and valued
  • Explore the use and applications of futures and options

Overview of the Market

This section provides a review of the types of exchanges, membership structure and the mechanics of trading.

  • Membership structure
    • types of clearing and non clearing members
  • Role of the Exchange
    • rules and procedures
  • Mechanics of trading
    • trade order receipt

The Clearing House

The following section reviews the role and function of the clearing house and the operations of clearing members.

  • Function of the clearing house
    • ownership of the clearing house
    • membership requirements
  • Margining system
    • initial and variation margin
    • profit/loss calculation
    • SPAN

Futures Contracts

This section explains in detail how futures contracts are constructed and looks at the different types of products.

  • Defining a futures contract
    • key terminology
    • contract specifications
  • Basic pricing theory
    • cost of carry relationship
    • basis, and carry return
    • arbitrage and futures prices
  • Main types of futures
    • bonds, stir, equity, commodities, currencies
    • calculating the tick value
  • Profit loss calculations
  • Basic hedge ratio
    • adjusting the hedge ratio
  • Spread trading strategies
    • intra and inter contract spreads

Options Contracts

The following section explains how options contracts are constructed and looks at the different types of expiry profiles.

  • Defining an option call/put
    • obligations and rights
    • terminology explained
  • Types of options
    • options on futures and the underlying product
  • Basic option pricing
    • time value and intrinsic value
    • overview of the Greeks
  • Users and uses versus futures
    • profit loss profiles at expiry
  • Popular hedging and trading strategies
    • portfolio protection and enhancement
    • combining positions

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