Introduction

The NISM Series VIII: Equity Derivatives Exam includes a significant emphasis on various derivative trading strategies. Whether you are hedging risks, speculating on price movements, or trying to capitalize on arbitrage opportunities, having a solid grasp of these strategies is crucial for passing the exam.

Hedging Strategies

Hedging is the process of mitigating potential losses in a portfolio by using derivatives. Commonly, futures and options contracts are used as hedging tools. For example, a protective put allows an investor to safeguard against losses in a stock position by purchasing a put option. Understanding concepts like put-call parity and how to hedge using derivatives is crucial for the exam.

Speculation Strategies

Speculation in the derivatives market involves betting on the future price movements of an underlying asset. Familiarize yourself with strategies like bullish and bearish spreads, which allow traders to profit from an expected upward or downward price movement. The covered call strategy, where an investor sells a call option while holding the underlying stock, is often tested in the exam.

Arbitrage Strategies

Arbitrage involves simultaneously buying and selling an asset to profit from price differences in various markets. For the exam, you’ll need to know how to identify arbitrage opportunities in the equity derivatives market, particularly between the spot and futures markets.

Mock Tests for Practice

To reinforce your understanding of these trading strategies, practice with mock tests on NISMTest.in. These tests feature scenario-based questions that help you apply your knowledge effectively.

Conclusion

Mastering derivative strategies is essential for success in the NISM Series VIII exam. Practice regularly, understand each strategy thoroughly, and apply it through mock tests.