AB Maximus E-Learning

Part 1: Future Markets and Contracts

After completing this course, you will be able to do the following:

1. Define the futures contacts
2. Understand the primary characteristics of futures contract
3. Explain the different between margin in the securities markets and margin in the futures markets
4. Describe how a futures trade takes place
5. Describe how a futures position may be closed out prior to expirations
6. Describe how a futures contract can be terminated by either a closeout at expiration, delivery and equivalent cash settlement.
7. Define initial margin, maintenance margin, variation margin and settlement price
8. Describe the process of marking to market
9. Compute the margin balance given the previous day’s balance and new futures price
10. Explain price limits, limit moves, limit up, limit down.
11. Describe the primary characteristic of the following types of futures contracts: commodity and stock index futures contract.
12. Define backwardation, contango and convergence
13. Describe how an arbitrage transaction is constructed to derive the futures price
14. Identify the different types of monetary and non-monetary benefits and costs associated with holding the underlying asset, and explain how they affect the futures price
15. Discuss the following futures trading strategies:

                  a)Calendar spread

                  b)Inter-commodity spread

           16. Describe the role of futures market.

Part 2: Option Markets and Contracts

1. After completing this course, you will be able to do the following:
2. Identify the basic elements and characteristics of option contracts
3. Define European option, American option, moneyness, payoff, intrinsic value and time value
4. Differentiate between exchange-traded options and over-the-counter options
5. Identify the different varieties of options in terms of the type of instrument underlying them.
6. Identifying the minimum and maximum values of European options and American options
7. Explain how the following factors affect the option value: Underlying asset price, Exercise price, Risk-free rate, Volatility of underlying asset price, Time-to-expiration, Cash flow to underlying asset, Cost of carry
8. Discuss the investment objective(s), structure, payoff, risk(s), value at expiration, profit, maximum profit, maximum loss, and breakeven underlying price at expiration of a covered call position
9. Discuss the investment objective(s), structure, payoffs, risk(s), value at expiration, profit, maximum profit, maximum loss, and breakeven underlying price at expiration of the following option strategies: bull spread, bear spread, straddle, and collar;
10. Illustrate how put-call parity for European option is established by comparing the payoffs on a fiduciary call and protective put.
11. Illustrate how violation of put-call parity for European options can be exploited and how those violations can be eliminated
12. Discuss the investment objective(s), structure, payoff, risk(s), value at expiration, profit, maximum profit, maximum loss, and breakeven underlying price at expiration of a protective put position.
13. Explain how an option price is determine in a one-period binomial model
14. Illustrate how an arbitrage opportunity can be exploited in one-period binomial model
15. List and briefly explain the assumption underlying the Black-Scholes-Merton model
16. Discuss the role of options markets in financial systems and society

Speaker’s Biography

Chong Lock Kuah, CFA, has more than 17 years of teaching experience in finance and investment related courses. He started teaching on a regular basis in-house and public-run preparatory courses for Capital Market Financial Advisory Services (CMFAS) Exam since 2003.  Mr. Chong conducted a course on Options Trading and Strategies for Bursa Malaysia Derivatives in 2011 before it launched the option contracts on crude palm oil futures. He also taught the IBF Accredited course at FTI@ Singapore Management University in 2009. 

Mr. Chong teaches part-time the undergraduate Finance module at the National University of Singapore Business School since 2007.  He has also taught Finance and Investment modules at SIM University (or currently known as Singapore University of Social Sciences) and SIM Global Education.  He received the Teaching Excellence award from SIM University in 2017.

Mr. Chong has been teaching CFA Examination Review courses at Sunway TES, Malaysia and at AB Maximus, Singapore for more than 10 years.

Mr. Chong is also a Trading Representative at UOB KayHian Pte Ltd.  He graduated from Queen Mary, University of London in 1981 with an honours degree in Mechanical Engineering and earned his CFA charter in 2003.