This document outlines a course on futures and options. The course aims to equip students with an understanding of derivatives markets and instruments like futures, options, and swaps. It will cover key concepts such as futures and options pricing models, hedging and trading strategies, and regulations. Students will learn to differentiate financial markets and derivatives, define and apply futures and options contracts, and analyze markets. Assessment includes exams, group projects, presentations, and class participation.

1. COLLEGE OF BUSINESS
UNIVERSITI UTARA MALAYSIA
COURSE CODE : BWFN 3023
COURSE NAME : FUTURES AND OPTIONS
PREREQUISITE : BWFF 2023 FINANCIAL MANAGEMENT II
1.0 SYNOPSIS
This course aims to equip students with basic principles and exposure of Derivatives
markets. This course also studies the development of Derivatives market in Malaysia as
well as discussing the increasing role that it plays in the capital market. The discussions
include the overview of financial markets and an introduction to derivative concepts,
introduces the principles of futures and futures trading, describe options and explains
different options trading strategies. This course will also focus on the market structure in
terms of regulatory and analysis as well as the overview of other derivative contracts which
are swaps and warrants.
2.0 OBJECTIVES
Upon completion of the course, students are expected to be able to
2.1 Discuss the concept of derivatives and the development of derivative market in
Malaysia.
2.2 Identify futures contract available in the market.
2.3 Differentiate the trading strategies available for futures.
2.4 Understand the option markets and explain how options can be used to hedging,
speculating and arbitraging.
2.5 Discuss the market structure in term of rules and regulations.
3.0 LEARNING OUTCOME
Upon completion of the course, students will be able to
3.1 Differentiate financial market and derivative; and the instruments
available.(C1,P1,A1)
3.2 Define Futures, differentiate between commodity and financial futures as well as
the market participants.(C1,P1,A1)

2. 3.3 Explain the principles and application of hedging, speculating, spreading and
arbitraging.(C3,P2,A3)
3.4 Define and categorize the options, including the methods of quoting options
price.(C3,P3,A3)
3.5 Describe the properties of fundamental and technical analysis.(C3,P2,A3)
4.0 REFERENCES
Hull,J.C. (2013 ). “Fundamentals of Futures and Options Markets”, Pearson-Prentice
Hall, 8th edition.
Don M.Chance & Robert Brooks (2013), “An Introduction to Derivatives and Risk
Management”, South- Western Cengage Learning, 9th edition.
Malaysian Futures and Options, Securities Commission, Kuala Lumpur,2005.
Hull, J.C (2013), “Options, Futures and Other Derivative Securities”, Prentice Hall, 8th
Edition.
5.0 COURSE CONTENT
NO. TOPICS/CONTENT HOURS
1. 1.0 OVERVIEW OF DERIVATIVES
1.1 What are derivatives
1.2 The exchange
1.3 The clearing house
1.4 Intermediaries in the futures and options market
1.5 Users of futures and options
3
2. 2.0 REGULATIONS OF FUTURES AND OPTIONS
2.1 Overview of futures and options markets regulations.
2.2 Establishment of futures markets, participants
2.3 Trading offences under the FLA
3
3. 3.0 INTRODUCTION TO FUTURES
3.1 How the futures market works
3.2 Differences between futures and forward contract

3. 3.3 Futures contract in Malaysia
3.4 Using futures to hedge
3.5 Speculating with Futures
3.6 Arbitraging with Future
6
4. 4.0 FUTURES CONTRACT
4.1 General concept
4.2 Determining futures/forward prices
- The cost and carry model
- The reverse cost and carry model
4.3 Using futures contract to manage risk
4.4 Crude Palm Oil Futures
4.5 Stock Index and Bond Futures
9
5. 5.0 OPTIONS
5.1 Types of options
5.2 Option payoff diagram
5.3 Option pricing
5.4 Put Call Parity
5.5 Binomial Option Pricing Model
5.6 Black-Scholes Option Pricing Model
5.7 Put Call Parity Arbitrage
9
6. 6.0 OPTION STRATEGIES AND PROFIT DIAGRAM
6.1 Long/Short Call
6.2 Long/Short Put
6.3 Naked Call
6.4 Covered Call
6.5 Vertical Spreads
6.6 Straddles and Strangles
6
7. 7.0 SWAP
7.1 Types of swap
– interest rate, currency, commodity, equity index.
7.2 Pricing Swaps
-Fixed-floating interest rate swap pricing
- Pricing a commodity swap
7.3 Using swaps to manage risk
3
8. 8.0 MARKET ANALYSIS ON FUTURES
8.1 Overview of Market Analysis 3

4. 8.2 Fundamental Analysis
8.3 Technical Analysis
TOTAL 42
6.0 TEACHING AND LEARNING
Lectures and class discussions will be the main mode of teaching. In addition to the mid-
term and the final examinations, students are required to hand-in one group project paper
and sit for all quizzes as assigned.
7.0 COURSE EVALUATION
Coursework
 Mid Term Examination 25%
 Group project and presentation 20%
 Class participation 5%
 Assignments and quizzes 10%
Final Examination 40%
Total 100%