“Stock Market” a word which has, always fascinated countless individuals. Many individuals are lured into the market to make a quick buck. However, understanding the dynamics of the market is hard to comprehend & understand! Predicting the market movement is not at all possible & countless individuals lose money trying to beat the index!
One such important element of the Indian stock market is the derivatives market. The Bombay Stock Exchange (popularly known as BSE) flagged off an index traded derivatives contract in India, in the year 2000.
Derivatives, the world over, have been used as a tool for “hedging the risk” (mitigate the risk) as much as one can. Derivatives are used to mitigate a lot of risks, right from fluctuations in the stocks, bonds, currency, commodity, interest etc.
However, if this risk management tool is used without fully understanding implications, it can lead to serious losses & even bankruptcy!
The term “Derivative” indicates that it has no independent value & its value is derived from the value of the underlying asset. Since, derivatives are financial contracts (obligations) that are made today but are going to arise in the near future; one has to understand the functioning of the stock market thoroughly to advise an individual on the best avenues of investment or trading. A wrong advice could be costly.
Most investors are lured into the stock market, by an advisor, who promises them potentially exponential returns for a small amount of investment. Most investors fall for such an opportunity! With so much at stake, it is critical for an advisor to understand the instrument thoroughly.
In order to offer a common minimum knowledge platform for all those involved in advising/selling the product to a customer, the National Institute of Securities Market (NISM) – an educational initiative of SEBI, has come up a certification (NISM Series VIII – Equity Derivatives Certification examination).The purpose of the examination is to:-
1) Understand various derivative product available in the derivatives market (e.g. forwards, futures, swaps, options etc)
2) Regulations & the risk associated with the products
3) Exchange mechanism of clearance & settlement
4) Understand the financial structure in India.
The examination is of 2 hours duration & is conducted across India by NISM, through its registered test centers. The examination is of 100 marks & consists of 100 questions of 1 mark each. The examination is based on the Multiple Choice Question (MCQ) format. One needs a passing score 60% (i.e. 60 marks) to clear the examination, while every wrong answer is 0.25 (i.e. 25%) marks deducted from the score.
Although, NISM sends across an updated study material to all those candidates who register for the exams, it’s equally important to test one’s exam preparations by enrolling for mock exams available online.
Before enrolling for the online mark exams, look at important parameters like last updation of the question bank, relevance to the subject matter, does it offer the right answers or not, does it provide you with the necessary explanations for the answers, cost factor etc.
The NISM Series VIII Equity Derivatives certification examination has become a mandatory certification for anyone who plans to get into trading or advising of the product. So, if you are among those individuals who are looking at the stock market to make a career, this is one certification you must have to accelerate your career growth.