Equity DerivativesCertification Guide.
The gold standard for anyone in the equity derivatives space. Covers futures, options, Greeks, clearing & settlement, and SEBI regulations. Mandatory for anyone working at a brokerage in the F&O segment.
Suggested prep: 20-30 days
Avoid blind guessing.
Computer-Based Test (CBT)
Derivatives track
01Overview
What this certification is really testing.
Ideal for
- Aspiring F&O traders
- Brokerage firm employees
- Anyone dealing in equity derivatives
- Retail traders wanting to understand derivative regulations
Career paths
- F&O Trader at Brokerage Firm
- Derivatives Analyst
- Risk Manager
- Proprietary Trading Desk
- Sub-Broker (F&O Segment)
Mandatory for
- Approved users of trading member (equity derivatives segment)
- Sales personnel of equity derivatives trading members
- Associated persons dealing in equity derivatives
02Syllabus
Study by chapter weightage, not by guesswork.
The highest scoring chapters carry 78% of the paper. Start there, then use the low-weight chapters for polish.
Chapter weightage
High-weightage focus
Introduction to Forwards and Futures
25%Futures contract specifications - lot size, expiry · Cost of Carry model and futures pricing · Basis and convergence at expiry
Introduction to Options
25%Call and Put options - rights vs obligations · Option premium = Intrinsic Value + Time Value · Moneyness - ITM, ATM, OTM
Legal and Regulatory Environment
15%SEBI Act 1992 and powers of SEBI · Securities Contracts (Regulation) Act 1956 - SC(R)A · SEBI (Stock Brokers) Regulations 1992
Clearing and Settlement System
13%Role of clearing corporation (NSE Clearing / Indian Clearing Corp) · Novation - clearing corp as CCP · SPAN Margin vs Exposure Margin
03Key concepts
Concepts and formulas to keep handy.
Key concepts to remember
- Futures Price = Spot x [1 + r(t/365)] - Cost of Carry model
- Basis = Spot Price - Futures Price (converges to zero at expiry)
- Call buyer: unlimited profit, max loss = premium paid
- Put buyer: max profit = Strike - Premium, max loss = premium paid
- Option writer (seller) has UNLIMITED risk (for calls) or Strike-level risk (for puts)
- Delta: 0 to 1 for calls, -1 to 0 for puts - measures price sensitivity
- Gamma: rate of change of Delta - highest for ATM options near expiry
- Theta: time decay - always negative for option buyers
- Vega: sensitivity to volatility - all options have positive Vega
- Mark-to-Market: daily settlement - profits credited, losses debited
- SPAN margin covers probable losses; Exposure margin covers extreme scenarios
- Position limits are set at client, trading member, and market-wide levels
Important formulas
- Futures Price = Spot Price x [1 + r x (days to expiry / 365)]
- Intrinsic Value (Call) = max(0, Spot Price - Strike Price)
- Intrinsic Value (Put) = max(0, Strike Price - Spot Price)
- Time Value = Option Premium - Intrinsic Value
- P&L (Futures) = (Exit Price - Entry Price) x Lot Size x Number of Contracts
- Contract Value = Price x Lot Size
- Initial Margin = Contract Value x Margin %
- Put-Call Parity: C + PV(K) = P + S (for European options)
- STT on Sell side of Futures = 0.0125% of turnover
- STT on Sell side of Options (in-the-money at exercise) = 0.0625% of intrinsic value
04Study plan
A clear way to study this module.
Study strategy
- Read the NISM workbook cover-to-cover FIRST - don't start with mock tests
- Focus 60% of your time on Chapters 3 + 4 (Futures & Options) - they carry 50% weightage combined
- Memorize all formulas for futures pricing, intrinsic value, and P&L calculation
- Chapter 8 (Legal & Regulatory) is 15% - don't skip the SEBI regulations and position limits
- Practice at least 5 numerical P&L and margin calculations daily
- Take 3-4 full-length mock tests in the last 5 days of preparation
- Understand Greeks conceptually - you won't need to calculate Black-Scholes, but understand direction of Delta/Theta/Vega
- Make a cheat sheet of key differences: American vs European, Futures vs Forwards, SPAN vs Exposure margin
Exam-day tips
- You get 72 seconds per question - flag numerical questions and revisit later
- With 0.25 negative marking, only guess if you can eliminate 2+ wrong options
- Attempt regulatory questions first (easier, require recall not calculation)
- For P&L questions, always check if the question says 'per lot' or 'per share'
- Read all 4 options carefully - NISM often has closely worded answer choices
- Keep 20 minutes buffer at the end to review flagged questions
05Common mistakes
The pass mark is simple. The paper is not.
Scoring warning
Because this paper has negative marking, precision matters more than speed. Attempt the sure questions first, then return to calculations and close-call options.
Common mistakes
- Confusing 'buyer' and 'writer' payoffs - the writer has OPPOSITE payoff to buyer
- Forgetting that basis converges to zero at expiry, not immediately
- Mixing up SPAN margin (covers probable loss) with Exposure margin (covers extreme moves)
- Ignoring STT implications - it differs for futures vs options and buy vs sell side
- Treating F&O income as capital gains instead of business income for tax purposes
Ready to register?
Book your slot on the official NISM portal. Confirm the current fee and exam pattern there before you pay.
Open NISM portal