DFOL Syllabus — Learning Objectives by Topic

Use this syllabus as your checklist for DFOL. Topics and weightings are aligned to CSI’s official DFOL blueprint, and sections map 1:1 to the CSI curriculum chapters.

Official sources (CSI):

• DFOL course page: https://www.csi.ca/en/learning/courses/dfol/
• DFOL curriculum: https://www.csi.ca/en/learning/courses/dfol/curriculum
• DFOL exam credits (structure + weightings): https://www.csi.ca/en/learning/courses/dfol/exam-credits

Official topic weightings

What’s covered

• An Overview of Derivatives (3%)
• Futures Contracts (11%)
• Exchange Traded Options (14%)
• Swaps (7%)
• How Investment Funds and Structured Products Use Derivatives (6%)
• A Review of the Risk and Reward Profiles of Common Option Strategies (16%)
• Opening and Maintaining Option Accounts (25%)
• The Role of Clearing Corporations and Exchanges in Listed Options Trading (10%)
• Contract Adjustments and Special Considerations and Risks of Non-Equity Options (8%)

An Overview of Derivatives (3%)

Practice this topic →

Chapter 1 - An Overview of Derivatives

• Define what a derivative is.
• Explain Common Features of All Derivative Instruments.
• Identify types of Derivative Instruments.
• Differentiate between en Option-Based and Forward-Based Derivatives.
• Explain Exchange-Traded and Over-the-Counter Derivatives.
• Differentiate between en Exchange-Traded and Over-the-Counter Derivatives.
• Identify types of Underlying Interests.
• Identify commodities as common derivative underlyings (concept).
• Identify financial underlyings for derivatives (concept).
• Explain why derivatives Useful (concept).
• Define Operational Considerations (concept).
• Describe who uses derivatives and the extent of their use (concept).

Futures Contracts (11%)

Practice this topic →

Chapter 2 - Basic Features of Forward Agreements and Futures Contracts

• Summarize the key features of Forward-Based Derivatives.
• Describe the history of Forwards.
• Define what a forward Agreement is.
• Define what a futures Contract is.
• Describe organized futures markets and their standardization/clearing features (concept).
• Explain how futures contracts are bought and sold and how positions are opened/closed (concept).
• Explain cash settlement for derivative contracts and how it differs from physical delivery (concept).
• Explain Margin Requirements and Marking-to-Market.
• Explain Futures Trading and Leverage.
• Interpret a futures quotation page and identify key contract fields (concept).
• Explain Contract Size and the Value of the Underlying Interest.

Chapter 3 - Pricing of Futures Contracts

• Summarize the key features of Futures Pricing.
• Explain Futures Market versus Cash Market.
• Explain Cost of Carry.
• Define basis in futures markets and explain why it matters for hedging (concept).
• Explain Cash and Carry Arbitrage.
• Explain Reverse Cash and Carry Arbitrage.
• Explain Conditions that Facilitate Arbitrage.
• Explain inverted markets (backwardation) and how they relate to the futures curve (concept).
• Explain convergence between futures and spot prices near expiry (concept).

Chapter 4 - Hedging with Futures Contracts

• Define Hedging (concept).
• Identify types of Hedges.
• Define Imperfect Hedges (concept).
• Explain Optimal Hedge Ratio.

Chapter 5 - Speculating with Futures Contracts

• Explain what attracts attracts Speculators.
• Identify types of Speculators.
• Explain Price Forecasting Techniques.
• Define Fundamental Analysis (concept).
• Define Technical Analysis (concept).

Exchange Traded Options (14%)

Practice this topic →

Chapter 6 - Basic Features of Options

• Describe the history of Options.
• Explain Key Option Terminology and Definitions.
• Explain Application of Key Terms and Definitions.
• Explain Why Investors Buy Options.
• Explain Why Investors Write Options.
• Explain Other Related Benefits of Options.
• Explain Advantages of Exchange-Traded Options versus Over-the-Counter Options.
• Explain Reading Option Quotations.
• Explain Common Questions Pertaining to the Options Market.

Chapter 7 - Pricing of Options

• Explain option pricing at a high level (concept).
• Explain Major Factors that Affect the Price of an Option.
• Calculate intrinsic value for calls and puts in simple scenarios.
• Explain time value and time decay for options (concept).
• Define delta and interpret its directional meaning for option price sensitivity (concept).

Chapter 8 - Over the Counter Options

• Explain Over-the-Counter Interest Rate Options.
• Explain Interest Rate Caps.
• Explain Interest Rate Floors.
• Explain Interest Rate Collars.
• Recognize common categories of exotic options (concept).

Swaps (7%)

Practice this topic →

Chapter 9 - Introduction to Swaps

• Explain Overview of the Swap Market.
• Define what a swap is.
• Explain Role of the Swap Dealer.
• Explain History of Swaps.
• Explain OTC Derivatives Market Reform.

Chapter 10 - Interest Rate Swaps

• Explain Plain Vanilla Interest Rate Swap.
• Explain A Note on Rate and Day Count Conventions.
• Describe the structure of f an Interest Rate Swap.
• Explain how to price Interest Rate Swap at a high level (concept).
• Explain Indication Pricing Schedule.
• Explain credit risk in OTC derivatives and why collateral/clearing can matter (concept).
• Explain Terminating an Interest Rate Swap.
• Explain why interest Rate Swaps Used (concept).
• Explain Deliverable Interest Rate Swap Futures and Centrally Cleared Swaps.
• Explain Other Types of Interest Rate Swaps.
• Explain swaptions and their role in interest rate risk management (concept).

Chapter 11 - Currency Swaps

• Describe the structure of f a Currency Swap.
• Explain Currency Swaps as a Portfolio of Fixed- and/or Floating-Rate Bonds.
• Explain the pricing of Currency Swaps at a high level (concept).
• Explain reasons for Currency Swaps (concept).

Chapter 12 - Credit Swaps

• Define Credit Derivatives (concept).
• Explain The Role of Credit Derivatives.
• Describe the structure of f Credit Default Swaps (CDSs).
• Explain what Index CDSs are.
• Explain why cDSs and Index CDSs Used (concept).

Chapter 13 - Other Types of Swaps

• Define Equity Swaps (concept).
• Define Commodity Swaps (concept).

How Investment Funds and Structured Products Use Derivatives (6%)

Practice this topic →

Chapter 14 - Mutual Funds

• Explain Regulatory Framework for Canadian Investment Funds and Structured Products.
• Explain Use of Derivatives in Mutual Funds.
• Explain Risks of Derivatives Use by Mutual Funds.

Chapter 15 - Alternative Mutual Funds, Closed-End Funds, And Hedge Funds

• Explain Use of Derivatives by Alternative Mutual Funds and Closed-End Funds.
• Explain Alternative Investments and Alternative Strategies.
• Explain Hedge Funds Compared to Alternative Mutual Funds.
• Identify types of Alternative Strategies.
• Explain Advantages and Disadvantages of Derivatives.

Chapter 16 - Principle Protected Notes (PPNs)

• Explain Principal-Protected Notes (PPNs) – What Are They.
• Explain PPN Structures and the Use of Derivatives.
• Explain CPPI and Zero-Coupon Bond Plus Call Option Structures – Key Differences.

Chapter 17 - Derivative-Based ETFs

• Define Introduction (concept).
• Describe commodity ETFs and how they may use derivatives to obtain exposure (concept).
• Explain Swap-Based ETFs and the Synthetic Replication of Indexes.
• Explain Leveraged and Inverse ETFs.

A Review of the Risk and Reward Profiles of Common Option Strategies (16%)

Practice this topic →

Chapter 18 - Bullish Option Strategies

• Analyze the risk and reward profile of Long Call.
• Analyze the risk and reward profile of Married Put.
• Analyze the risk and reward profile of Covered Call (also known as Covered Write).
• Analyze the risk and reward profile of Put Writing.
• Explain Benchmark Indexes for Income-Producing Option Strategies.
• Explain A Brief Review of Spreads, Straddles and Combinations.
• Explain Bull Call Spread.
• Explain Bull Put Spread.

Chapter 19 - Bearish Option Strategies

• Analyze the risk and reward profile of Long Put.
• Analyze the risk and reward profile of Protected Short Sale.
• Analyze the risk and reward profile of Covered Put Sale.
• Analyze the risk and reward profile of Call Writing.
• Explain Bear Put Spread.
• Explain Bear Call Spread.

Chapter 20 - Option Volatility Strategies

• Explain the basics of to Volatility.
• Explain the basics of to Option Sensitivities.
• Explain Importance of Volatility to Options Trading.
• Explain Short Volatility Strategies.
• Explain Long Volatility Strategies.

Opening and Maintaining Option Accounts (25%)

Practice this topic →

Chapter 21 - Conduct and Practices

• Define Options Regulation (concept).
• Explain Individual Registration Categories.
• Explain Registrant Code of Ethics.
• Explain Registrant Standards of Conduct.
• Explain Trading and Sales Practices.
• Explain Regulations Covering Registrants Employed by CIRO Investment Member Firms or Approved Participants of the Bourse.

Chapter 22 - Opening and Maintaining Retail Option Accounts

• Explain Completion and Approval of Option Account Application Forms.
• Explain Significant Items of Information on the Option Account Application Form.
• Explain Unanswered Questions on the Option Account Application Form.
• Explain Responsibility for Final Acceptance of an Option Account.
• Explain Completion of the Derivatives Trading Agreement Prior to Option Transactions.
• Explain Risk Disclosure Statement.
• Explain Applying a Suitability Concept to Option Recommendations.
• Explain Managed Accounts and Simple Discretionary Accounts.
• Explain Transfer of Option Accounts from One Member Firm to Another.
• Identify commissions as a trading cost and where they appear in order execution (concept).

Chapter 23 - Client Margin Requirements

• Explain Basic Margin Terms.
• Explain Factors Affecting the Amount of Margin Required.
• Explain CIRO and Bourse de Montréal Minimum Margin Requirements for Equity and index Option Strategies.
• Explain Meeting Margin Calls.
• Explain Capital Requirements for Firm and Market Maker Accounts.
• Explain Member Firm Clearing Deposit Requirements for positions at the Clearing Corporation.

Chapter 24 - Entering Listed Option Orders

• Explain Essential Information Required for All Types of Orders.
• Explain Order Ticket Information Unique to Options.
• Explain A Generic Order Entry Screen.
• Identify types of Buy and Sell Orders.
• Identify types of Contingent Orders.
• Explain Implied Orders and the Bourse De Montréal’s Implied Pricing Algorithm.
• Explain The Bourse de Montréal’s User-Defined Strategies (UDS) Functionality.

Chapter 25 - Canadian Tax Aspects of Listed Options Trading

• Explain Professional versus Non-Professional Option Traders.
• Explain Federal Tax Consequences for Non-Professional Traders.
• Explain Federal Tax Consequences for Professional Traders.
• Explain Tax Consequences for LEAPS® Investors.
• Explain Allowable Use of Exchange-Traded Options in RRSPs, RRIFs and RESPs.

Chapter 26 - Opening and Maintaining Institutional Options Accounts

• Explain Opening Corporate Option Accounts.
• Explain Opening Option Accounts for Acceptable Institutions.
• Explain Know Your Client Rule.
• Explain Permissible Option Transactions for Pension Plans, Insurance Companies and Trust Companies in Canada.
• Explain Canadian Mutual Funds.

The Role of Clearing Corporations and Exchanges in Listed Options Trading (10%)

Practice this topic →

Chapter 27 - The Role of Clearing Corporations in Listed Options Trading

• Define what a clearing Corporation is.
• Describe the Canadian Derivatives Clearing Corporation and its role in clearing (concept).
• Describe the Options Clearing Corporation and its role in clearing (concept).
• Explain Functions of a Clearing Corporation.

Chapter 28 - The Role of Exchanges in Listed Options Trading

• Define what an options Exchange is.
• Explain Providing a Trading Forum.
• Explain Adding and Deleting Option Classes.
• Explain Adding and Deleting Option Series.
• Explain Expiration Cycles on the Bourse.
• Explain Setting Reporting Levels, Position Limits and Exercise Limits.
• Explain Setting Capital and Margin Rules.
• Explain Developing and Administrating Rules Governing the MarketPlace and Approved Participants Dealing in Options.

Chapter 29 - Listed Options Trading

• Explain The Bourse de Montréal Inc.
• Identify the role of U.S. options exchanges in listed options trading (concept).

Chapter 30 - A Day in The Life of a Market Maker

• Explain Obligations of Market Makers.
• Explain How Market Makers Reduce or Eliminate Their Exposure.

Contract Adjustments and Special Considerations and Risks of Non-Equity Options (8%)

Practice this topic →

Chapter 31 - The Impact of Stock Splits, Dividends and Rights Issues On Option Contracts

• Explain Adjustments for Stock Splits.
• Explain Adjustments for Stock Dividends.
• Explain how cash dividends can affect option premiums and contract adjustments (concept).
• Explain Impact of Dividends on Option Premiums.
• Explain how rights issues can lead to option contract adjustments (concept).

Chapter 32 - Stock Index Options

• Describe unique characteristics and risks of Index Options.
• Explain Key Index Option Contracts.

Chapter 33 - Currency Options

• Explain Exchange Rate Quoting Convention.
• Explain Selecting the Right Option.
• Describe unique characteristics and risks of North American Listed Currency Options.