NISM EQUITY DERIVATIVES

I. Basics of Derivatives

• Basics of derivatives
• Evolution of derivatives market
• Indian derivatives Market
• Market participants
• Types of derivatives markets
• Significance of derivatives
• Various risk faced by the participants in derivatives

 II. Understanding Index

• Introduction to Index
• Significance and economic purpose of Index
• Types of Indices
• Attributes of an Index and concept of impact cost
• Index management
• Major Indices in India
• Applications of Index

 III. Introduction to Forwards and Futures

• Introduction to Forwards and Futures contracts
• Payoff Charts for Futures contract
• Futures pricing
• Cash and carry / Non-arbitrage model for futures pricing
• Expectancy model of futures pricing
• Concept of convergence of cash and futures prices
• Basic differences in Commodity, Equity and Index Futures
• Uses of futures
• Role of different players in futures market
• Use of futures contract as an effective instrument for managing risk
• Strategies for hedging, speculation and arbitrage in futures market

 IV. Introduction to Options

• Basics of options
• Payoff Charts for Options
• Basics of options pricing and option Greeks
• Fundamentals of options pricing
• Overview of Binomial and Black-Scholes option pricing models
• Basics of Option Greeks
• Uses of Options 

 V. Option Trading Strategies

• Option spreads and their payoff charts
• Straddle: market view and payoff charts
• Strangle: market view and payoff charts
• Covered Call: market view and payoff charts
• Protective Put: market view and payoff charts
• Collar: market view and payoff charts
• Butterfly spread: market view and payoff charts

 VI. Introduction to Trading Systems

• Trading Systems, corporate hierarchy, order types and conditions
• Selection criteria of Stock for trading
• Selection criteria of Index for trading
• Adjustments for Corporate Actions
• Position Limits
• Using daily newspapers to track futures and options

 VII. Introduction to Clearing and Settlement system

• Clearing Members, their role and eligibility norms
• Clearing Mechanism and computation of open positions
• Settlement Mechanism for stock and index futures and options
• Understanding margining and mark to market under SPAN
• Risk Management features and position limits

VIII. Legal and Regulatory Environment

• Securities Contract (Regulation) Act, 1956
• Securities and Exchange Board of India Act, 1992
• Important rules and regulations in derivatives trading
• Regulation in clearing & settlement and risk management
• Major recommendations of the L C Gupta Committee
• Major recommendations of the J R Verma Committee

 IX. Accounting and Taxation

• Accounting of Futures and Options contracts
• Taxation of Derivative transaction in securities
• Sales Practices and Investors Protection Services
• Risk profile of the investors.
• Importance of profiling clients in sales process
• Importance of KYC
• Documents required by the investors to trade in Derivatives contract
• Best practices in derivatives sales
• Investors Grievance Mechanism