What Is NISM Equity Derivatives?
NISM being short for National Institute of Securities Market. It’s an exam for those who wants to pursue career options in Stock Market in India. NISM consists of X series. Each series is solely for one career options. While NISM Equity Derivatives is one of the most important modules of NISM Certifications.
NISM Equity Derivatives covers very important concepts related to Derivative market, Futures and options. It also covers introductory information of Trading System, Clearing And Settlement System and even Accounting And Taxation for Securities market. This module also covers various Option Trading Strategies.
NISM VIII is great to get Basic Understanding Of Derivatives. It is mandatory examination in India for those who want to become Equity dealer, Stock Brokers and various other jobs related to it.
And my team is specialize in teaching all these exam series. Even though I have taught classes for almost all NISM series, the bulk of my experience has been in working with NISM V and NISM VIII. Although we will provide knowledge about all NISM series as we are group of experts working together. You can read more about us here.
Who Should Prepare NISM Equity Derivatives Examination?
As per rules, NISM Series 8 is mandatory for approved persons who worked in Equity Derivative segment like Equity dealers, Sales personnel who involved in equity derivative segment, etc.
Although an individual who are interested in Trading and want to learn more about Derivatives market can apply for this Certification Examination to enhance and test their knowledge.
NISM Exam Dates 2021:
There is no fixed date, one can apply online for Nism Certifications exam anytime they want in NISM Portal. One can even reschedule their exam within 15 days. You can choose your exam according to your choice in given time format.
This Exam schedule is applicable to all NISM Certification whether it is NISM VA or NISM Equity Derivatives.
Let’s understand it with an example: Let say you registered for exam on 30 December 2021. During registration you have to pick your examination center. Examination center could be your city or city near you, it’s up to you which one you want to pick.
You can reschedule your exam within 15 days, that is up to 14 January in this scenario. You can even register again, if you didn’t appear in the chosen date. But for that you need to repay the registration amount.
If you still have any confusion. You can comment below, we will do our best to help you out.
NISM Fees and Structure:
The Registration fees for NISM Equity derivatives is 1500 Rs only.
This NISM Test duration is around two hours. There are 100 questions including single and multiple choice questions along with Numericals. Each question is for 1 mark.
There is negative marking in NISM Series 8 while in case of NISM V A there is no negative marking. One will get Qualification certificate after passing this examination and NISM Certificate validity is of 3 years, after 3 years one needs to renew it.
NISM Equity Derivatives Study Material:
You can buy Nism VIII workbook from store or you can get previous edition of Ebook of NISM VIII from here free of cost.
We have also provided Free Mock test for Nism VIII in this website. Our Nism Mock test discuss all the relevant concepts of this Certification in detail and provide accurate explanation for every question.
NISM Mock Test Equity Derivatives (Free sample):
There is detailed Explanation for each question, make sure to read it thoroughly.
#1. Maximum profit of option seller would be the premium he/she receives
#2. Pranay thinks that the market will go down so he sold 10 lots of Index futures at 4000. But market rises and he bought back the futures contract at Rs.4020. What is his total profit/loss; if one lot of index is of 40
Given: Pranay sold 10 lots at Rs 4000 and bought it back at Rs 4020.
So his profit/loss= 4000-4020 = (-20).
Here negative sign indicate loss.
But there are 10 lots. So, quantity sold = No. of lots x lot size = 10 x 40 =400.
Therefore, Pranay’s total loss = – 20 x 400 = -8000. So. Total Loss is Rs.8000
#3. If Robert has sold a ITC future contract (contract multiplier 1000) at 600 and bought it back at 628. What is Robert's gain/loss?
Here, (contract multiplier 1000) means it have lot size of 1000
Robert sold a ITC future contract at 600 and bought it back ( close the position) at 628
then (600-628) = -28. Here, negative sign indicate loss.
So, total losss= lot size x loss in contract = 1000 shares x (-28) = – 28,000 Rs.
Therefore, Robert’s loss is of Rs.28,000
More insight: Whenever Robert sold a future contract then the position will fall down as per his expected loss but Robert didn’t put stop loss and after that bought back the sold contract at higher price i.e. 628. Therefore, Robert is at losss. If Robert would have put stop losss then if position would have fall down then he would be profitable.
#4. In Nifty 50 index every stock have same weightage
In Nifty 50 index every stock have different weightage. For example, Wipro has a weightage of approximately 2% in Nifty 50.
#5. What was the first International Monetory Market ?
In US 1972, Chicago mercantile exchange introduced International Monetary market (IMM), which allowed trading in currency futures for first time ever in history. This is the statement you need to remember for exam. It is theoretical question. It’s just a fact, there is nothing to explain here.
#6. SEBI regulates banks
SEBI regulates Stock market while RBI regulates banks in India.
#7. In options, option buyer needs to pay margin
In case of options, only seller needs to pay the margin not the option buyer. While Both seller and buyer needs to pay margins in future trading.
#8. Raghav bought call option of HDFC of strike price of Rs 400 of month March. So, it is advisable to buy put option of same strike price to close his position.
The correct answe is false. As we know, when market falls then we get profit onnly if we buy put. Similarly, if we buy call option and when market rises then we get profit. As Raghav bought call option then so to square off his position he needs to sell put option of same strike price.
#9. After maturity one can't trade an exchange traded option
After maturity one can’t trade an exchange traded option as per SEBI rules. You can only trade till the last date of expiry of the contract which is usually last thursday of that month.
#10. Which of the following statement is incorrect ?
offsetting and squareoff almost have same meaning.
Closing buy transaction: the meaning of this statement is little complicated so i will explain it with an example.
For instance: As we know in futures one can hold the stock for upto one month after selling .
Let say you hold the stock of TCS for few days in futures and after that put it for selling but suddenly the price of that stock goes down so to take advantage of this situation you need to close the position. This process is known as closing buy transaction. So here we can use closing buy transaction to square off / offset the short position.
As we know, an short position means to sell your asset with a view to buy it back when the price falls.
#11. If the future price is lower than equity price then this fall is known
For example : Let say in equity the price of HDFC stock is 4831 but in futures the price is 4833. This expected rise in price is known as Contango and this rising market is called as ” Contango Market”.
But if the future price is lower than equity price then this fall is known as Backwardation.
#12. Write option is a synonym of buy option
Write option means sell option. They mean the same thing
#13. Who can be option seller in Indian Stock Market?
All of them can sell options in Indian Stock Market. Even FII can do this by following all SEBI’s criteria.
#14. if you bought 20 contracts in futures and then sell 5 contracts from the same account , then how many contracts are left?
As you bought 20 contracts in futures and then sell 5 contracts from the same account then (20-5= 15) contracts are left only.
#15. As per theory, if spot price increases then the premium of a put option falls
As we all know, if spot price increases then the premium of a put option falls. As we usually trade in put option when market falls.
#16. The exchange pays to the gainers through the market-to-market margins of loss makers
When we trade in Futures, the daily valuation of future market is done by market-to-market of Index futures.
As we all know derivative market have contract’s with fix maturity of several months. But the valuation of profit/loss was calculated on daily basis by market-to-market of Index future and this settlement of profit/loss is known as Market-to-market selttlement. The exchange pays to the gainers through the market-to-market margins of loss makers on daily basis.
#17. Seller of put option can make a profit when the price rise or if it remain the same.
By theory, when we bought either call or put option our premium should increase in both condition. But in case when we sell either call or put option our premium should decreases to be profitable. The maximum profit of option seller is premium. so a seller of put option can make a profit when the price rise or if it remain the same.
#18. When client exit his position in derivative market. Then client need to pay STT
Whenever client exit his position. He need to pay STT in derivative market. When we purchase any share in equity we need to pay STT.
For instance : If A bought HDFC share in Equity market then he need to pay STT but when A exit his position. he don’t need to pay STT again.
But if A sold HDFC share in Equity market then he don’t need to pay STT but when A exit his position. he need to pay STT in this case. It’s gov rule and STT is generally fixed.
#19. In derivative market we trade in lot size while in cash market we trade for shares.
In derivative market we trade in lot size while in cash market we trade for shares.
#20. In call options, one can't close his contract before expiry or maturity of contract in India
In call options, one can’t close his contract before expiry or maturity of contract. This right was given by European options and India’s derivative market is based on European market. So rules are same for both. But in case of American option, one can close his contract. ( when we trade in call option, we usually expect the share price will rise.
#21. When we buy call we , we expect the market to fall so that we get profit through it. but when we buy put, we expect the market to rise.
When we buy call we , we expect the market to fall so that we get profit through it. but when we buy put, we expect the market to rise.
For example: One can buy / sell option with less investment. Let say A bought Infosys of call price of Rs580 and you buy it through 5 Rs premium, so even if market falls, the maximum loss wouldn’t be more than 5rs. profit could be theoretically unlimited. But ion case of selling call and put option, we compulsory need to do big investment compare to optrion buying
LIST OF CHAPTERS IN NISM Series 8 :
|NUMBER OF UNITS||WEIGHTAGE||DIFFICULTY LEVEL|
|Basic Of Derivatives||8%||Easy|
|Introduction To Forward And Futures||25%||Medium|
|Introduction To Options||25%||Medium|
|Option Trading Strategies||3%||Tough|
|Introduction To Trading System||4%||Medium|
|Introduction To Clearing And Settlement System||13%||Medium|
|Legal And Regulatory Environment||15%||Medium|
|Accounting And Taxation||3%||Tough|
|Sales Practices And Investor Protection||2%||Medium|
FAQ Related To Nism VIII :
1. How to clear nism equity derivatives exam?
2. How to apply nism exam?
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