Equity Derivatives Course Contents

Basics of Derivatives

• Meaning of derivatives

• Types of derivatives products

• Derivative Market Participants

• History of derivatives market

• Significance of derivative markets

• Risks in derivatives trading

Understanding Index

• The Index and its significance

• Different types of stock market indices

• Attributes of an Index

• Index management and maintenance

• Applications of indices

Introduction to Forwards & Futures

• Meaning of forward and futures contracts

• Terminology related to futures contracts

• Payoff for a futures contract

• Pricing of a futures contract

• Applications of a futures contract by Speculators, Hedgers and Arbitrageurs

Introduction to Options

• Concept of Options

• Payoffs in case of option contracts

• Difference between futures and options

• Fundamentals relating to option pricing

• Option pricing Models

• Option Greeks and Implied volatility

• Analysis of options from the perspective of option buyers and sellers

Strategies using Equity Futures & Equity Options

• Hedging using futures contracts

• Using futures contracts for trading

• Cash-carry and Reverse cash-and-carry arbitrage using futures

• Calendar spreads using futures

• Spread strategies using options

• Straddles and Strangles

• Collar and Butterfly Spread

• Covered calls and Protective Puts

• Arbitrage using options

• Delta-hedging using options

• Interpreting Open Interest and Put-Call ratioNon Mandatory Disclosures

Trading Mechanism

• Trading Mechanism for futures and options

• Entities involved in the trading of futures and options

• Different types of orders and order matching rule

• Selection criteria of stocks and index for futures and option trading

• Adjustment for Corporate Actions

• Trading costs

• Algorithmic trading

• Tracking of futures and options data

Derivatives Clearing & Settlement

• Different types of clearing members

• Interoperability of clearing corporations and its benefits

• Clearing and settlement mechanism for equity derivatives

• Risk management in equity derivatives segment

• Margin system in equity derivatives segment

• Position limits

• Settlement Guarantee Fund and Investor Protection Fund

Legal & Regulatory Environment

• Definition of securities and derivatives

• Functions of SEBI

• Regulatory framework for derivatives

• Derivative Market trading,

• Clearing, settlement and risk management

• Eligibility criteria for membership on derivatives segment

Accounting & Taxation on Derivative Trades

• Accounting treatment for derivatives contracts

• Accounting for Futures contracts

• Accounting for Open Interest

• Accounting for Equity Index Options

• Accounting for Open Positions

• Taxation of derivatives transaction in securities

Sales Practices & Investor Protection Services

• Importance of understanding client risk profile and Risk Disclosure Document

• Client Identification procedure

• Due Diligence process for customers

• Documents required under KYC process

• Suspicious Transaction Reporting

• Investor Grievance Redressal Mechanism

• Provisions with respect to Credit risk

• Dos & Don'ts of Derivative Trading