Index option structure, key risks, and the main listed Canadian stock index option contracts.
This chapter now returns to the current official DFOL curriculum. Its scope is narrow and practical: understand what makes stock index options different from single-stock options, and know the main listed Canadian index option contracts that appear in current market practice.
Index options let a trader hedge or express a view on a broad equity benchmark or a sector benchmark through a single contract. That makes them efficient, but it also creates specific risks around multiplier size, settlement method, basis mismatch, and the difference between an index exposure and a portfolio of actual stocks.
Exam Focus
distinguish index options from options on individual shares
identify the main risk points specific to index products
match the right listed index option contract to the exposure being hedged or traded