How to Prepare for NISM Series XVI
Chapter order, time needed, and where marks are actually lost on the Commodity Derivatives paper.
Series XVI mixes two kinds of question. Some test whether you know a fact: which act applies, what an exchange must disclose, what happens when a seller defaults on delivery. Others ask you to work something out: the fair value of a futures contract, the basis, what a hedge or option position earns. Preparation has to cover both, and the second kind needs practice with a calculator or spreadsheet, not just reading.
The pass mark is 60 out of 100, and a wrong answer costs 0.25. NISM has not published a pass rate for Series XVI, so no one can tell you reliably how hard it is in numbers. What you can use is the weightage table, which tells you exactly where the marks are.
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Study order by weight
Chapters grouped by marks, from the workbook's syllabus outline.
Highest
Chapters
3 Commodity Futures (15), 4 Commodity Options (15), 5 Uses of Commodity Derivatives (15), 7 Clearing, Settlement and Risk Management (15)
Marks
60
High
Chapters
1 Introduction to Commodity Markets (10), 6 Trading Mechanism (10)
Marks
20
Lighter
Chapters
2 Commodity Indices (5), 8 Legal and Regulatory Environment (5), 9 Accounting and Taxation (5), 10 Code of Conduct and Investor Protection (5)
Marks
20
| Priority | Chapters | Marks |
|---|---|---|
| Highest | 3 Commodity Futures (15), 4 Commodity Options (15), 5 Uses of Commodity Derivatives (15), 7 Clearing, Settlement and Risk Management (15) | 60 |
| High | 1 Introduction to Commodity Markets (10), 6 Trading Mechanism (10) | 20 |
| Lighter | 2 Commodity Indices (5), 8 Legal and Regulatory Environment (5), 9 Accounting and Taxation (5), 10 Code of Conduct and Investor Protection (5) | 20 |
A study plan that follows the marks
The workbook's chapter order builds each idea on the last, so read it in order, but give time in proportion to marks:
- 1
Chapters 1 and 2: markets and indices
Learn how spot and derivatives trading in commodities differ, who the participants are, what moves commodity prices, and how a commodity index is built and traded. Chapter 1's annexure on crop seasons is useful background for price questions.
- 2
Chapter 3: commodity futures
15 marks. Cost of carry, convergence, fair value, convenience yield, pay-offs, tick size and the final settlement price. Work the fair value examples yourself until you can do them without looking.
- 3
Chapter 4: commodity options
15 marks. Option terms, pay-offs, what drives the premium, the Greeks, and the difference between options on futures and options on goods. Draw each pay-off by hand once.
- 4
Chapter 5: uses of commodity derivatives
15 marks. Long and short hedges, speculation, arbitrage, spreads, basis and option strategies. For each one, write down who uses it, the position, and the best and worst outcome.
- 5
Chapters 6 and 7: trading, clearing, delivery and risk
25 marks together. Membership, the trading system, contract specifications and order types, then clearing, the delivery process, default penalties, margins and position limits. Chapter 7 is detail-heavy, so make notes as you go.
- 6
Chapters 8 to 10, then revise
Regulation, accounting and taxation, and the code of conduct carry 15 marks between them. They are mostly facts, so short notes work well. Then spend the remaining time on timed practice and on the chapters your practice shows are weak.
Free account, this exam preselected.
An example four-week schedule
Week 1: chapters 1 to 3. Week 2: chapters 4 and 5. Week 3: chapters 6 to 10. Week 4: revision and at least two full 100-question timed papers, with time between them to fix the weak chapters the first one shows. Stretch it if numbers are new to you; compress it if you already work on a commodity desk.
Where marks are lost
- check_circleMixing up a long hedge and a short hedge, or who should use which
- check_circleGetting the sign of the basis wrong, or what a strengthening or weakening basis does to a hedger
- check_circleConfusing cost of carry with convenience yield in fair value questions
- check_circleTreating options on futures and options on goods as the same thing
- check_circleSkimming the delivery and default rules in chapter 7, although the chapter carries 15 marks
- check_circleSkipping the 5-mark chapters, although together they carry 20 marks
- check_circleGuessing carelessly: at 0.25 per wrong answer, many wrong guesses add up quickly
How to know you are ready
Take a full paper under real conditions: 100 questions, 120 minutes, 0.25 off for each wrong answer. If you can score 60 with a margin and finish in time, book your slot. If you are close but not there, use the weightage table to decide where to spend the next few days: a weak chapter worth 15 marks is a better target than one worth 5.
Practise numericals the way you will meet them at the test centre, where the workstations have Microsoft Excel or LibreOffice. On exam day, read every option before choosing: a calculation question often lists the answer you get with one step done the wrong way round.
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