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NISM Series VIII: Equity Derivatives exam preparation
Futures and options on shares and indices: contracts, pricing, payoffs, strategies, clearing, margins and the rules.
NISM Series VIII exam pattern
NISM Series VIII syllabus, unit by unit
The exam covers 10 units. The percentage is the share of questions each unit usually carries, so spend your time in that proportion.
Unit 1 Basics of derivatives8%
A derivative gets its value from something else: a share, an index, a currency or a commodity. This unit teaches the language, the purposes of derivatives and the differences between types.
- Forwards versus futures.
- Hedgers, speculators and arbitrageurs.
- Exchange-traded versus over-the-counter.
Unit 2 Understanding index2%
Index derivatives are based on stock indices. A short unit on how an index is built.
- Market capitalisation weighting and free float.
- Sensex and Nifty 50.
Unit 3 Introduction to forwards and futures25%
The heaviest unit in the exam. Contract specifications, pricing, payoffs, basis, margins and hedging with index futures.
- Payoffs of long and short futures.
- Cost of carry pricing.
- Basis, contango and backwardation.
- Hedging with index futures.
Unit 4 Introduction to options25%
Options are the second heavy unit. Calls, puts, moneyness, premium, Greeks, put-call parity and the payoff of each position.
- Payoffs and break-even of calls and puts.
- Intrinsic value and time value.
- The Greeks.
- Settlement and exercise.
Unit 5 Option trading strategies3%
Combining options and underlying positions shapes the risk and reward. A short unit worth three marks.
- Covered call, protective put, spreads, straddle, strangle.
Unit 6 Introduction to trading systems4%
How orders are placed and matched in the exchange's electronic system.
- Order types and priority.
- Trading hours.
- Position limits and bans.
Unit 7 Introduction to clearing and settlement system13%
After the trade comes the settlement. This unit covers clearing members, the clearing corporation, margins, daily MTM and final settlement.
- Roles of clearing corporation and clearing members.
- Margin types and collateral.
- Settlement of futures and options.
Unit 8 Legal and regulatory environment15%
Who permits derivatives, who regulates them, who is eligible to trade and what safeguards exist. Questions here test exact names and rules.
- SCRA, SEBI Act and committees.
- Eligibility of securities and members.
- Investor protection and risk disclosure.
Unit 9 Accounting and taxation3%
How profits and losses from derivatives are treated for accounts and tax.
- Income tax treatment of F&O.
- STT.
Unit 10 Sales practices and investor protection services2%
Good conduct in selling derivatives, from advice to complaints.
- Suitability, disclosures and ethics.
Try 4 sample questions
These are from Mock 1. Open the free mock to see the correct answer and the reason behind each one.
Q1. Which term is described here? The clearing corporation maintains a fund to cover member defaults, built from contributions of members and the corporation.
- Settlement guarantee fund
- Leverage
- Settlement of stock options
- Self-clearing member
Q2. Which statement best describes “Expiry cycle”?
- Basis is the difference between the spot price and the futures price. It narrows to zero at expiry as the two prices converge.
- Index and stock futures have near-month, next-month and far-month contracts, and a contract expires on the day set by the exchange; on expiry it is cash settled.
- Contango is a market in which futures prices are higher than the spot price, normally due to carrying costs.
- When a buyer exercises, a seller is assigned at random or by rule and must perform the obligation under the contract.
Q3. Which statement best describes “Protective put”?
- A person whose derivatives turnover or losses cross specified thresholds may need to get accounts audited under the tax law.
- A protective put buys a put against a held position, setting a floor under the loss at the cost of the premium.
- The clearing corporation becomes the counterparty to every trade through novation, guaranteeing settlement and managing risk.
- The MWPL caps the total open positions across all traders in a stock's derivatives; when it reaches 95% the stock enters a ban period.
Q4. Which term is described here? A short put's profit at expiry = premium − max(strike − spot, 0); break-even = strike − premium.
- SEBI Act
- Short put payoff
- Reverse cash-and-carry
- L.C. Gupta Committee
How to prepare for NISM Series VIII
- Download the study guide and read the first three pages.
- Study the biggest units first. Their weight shows on this page.
- Take Mock 1 after one pass through the guide.
- Move to the next mock only when you clear the pass mark by 15 marks.
- Redo every wrong answer. Each one names its unit.
The app also lists your weak units after each mock and runs in English, Hindi or Gujarati. Mock tests and study material are in English.
Frequently asked questions
How many questions are there in NISM Series VIII?
The NISM Series VIII (Equity Derivatives) exam has 100 multiple-choice questions carrying 100 marks, to be answered in 120 minutes.
What is the passing score for NISM Series VIII?
The pass mark is 60%. Aim to clear 75% in practice mocks before you book the real exam.
Is there negative marking in NISM Series VIII?
Yes. The negative marking is 25% of marks. Practise leaving a question blank when you are unsure.
Is the NISM Series VIII study guide free?
Yes. UpperCrust Academy gives a free 41-page study guide PDF for NISM Series VIII, written unit by unit.
Are the NISM Series VIII mock tests free?
Yes. You get 5 full-length mock tests with the answer and the reason for every question. Sign in once with your mobile number or Google to start.
Is this affiliated with NISM?
No. UpperCrust Academy is independent preparation material from UpperCrust Wealth. Confirm the latest syllabus and exam rules on the official NISM website.
More NISM exams
UpperCrust Academy is independent study material from UpperCrust Wealth. It is not affiliated with NISM, SEBI or AMFI. For education only. Not investment advice. Always confirm the latest syllabus and rules on the official NISM website.