These twelve are drawn from where NISM Series VIII concentrates its marks. Attempt each before reading the answer.
1. Cost of carry
Under the cost of carry model, fair futures price equals what?
Answer: spot price + net cost of carry — financing cost of holding the underlying to expiry, less any income such as dividends. Futures normally trade above spot for this reason.
2. The dividend trap
A stock will pay a dividend before expiry. What happens to the fair futures price?
Answer: it falls. The dividend is income to whoever holds the stock, so it reduces the net carry. Candidates routinely answer "rises" here.
3. Basis
Spot is 620, futures 628. What is the basis and what does it indicate?
Answer: −Rs 8, indicating contango. Basis is spot minus futures. A negative basis means futures above spot — the normal condition.
4. Convergence
Why do futures and spot converge at expiry?
Answer: no carrying period remains, so the cost of carry falls to zero. That convergence is what makes cash-and-carry arbitrage self-correcting.
5. A short futures position
A trader sells one futures contract at Rs 745 and buys it back at Rs 754. Lot size 1,500.
Answer: a loss of Rs 13,500. Short, and the price rose Rs 9 against the position: 9 × 1,500. Most candidates compute 13,500 correctly and then mark it positive. Name the direction before the arithmetic.
6. Two contracts
Long 2 contracts at Rs 450, squared off at Rs 438, lot size 500.
Answer: a loss of Rs 12,000. 12 × 500 × 2. Multiply by the number of contracts, not just the lot size.
7. Moneyness
Spot 495, put strike 480. Is the put in or out of the money?
Answer: out of the money. A put wants the price down; spot is above the strike. Its entire premium is therefore time value.
8. Writing a put
A put with strike 480 is written for a premium of Rs 26, lot size 1,000. At expiry the stock closes at 430.
Answer: a loss of Rs 24,000. Intrinsic value paid out is 480 − 430 = Rs 50; against Rs 26 premium received that is −Rs 24 per share across 1,000. Always net the premium against the intrinsic value.
9. Break-even
What is that writer's break-even price?
Answer: Rs 454 — strike minus premium. Below it they lose; above it the position is profitable.
10. Delta
What is the delta of a far out-of-the-money option?
Answer: near 0. A deep in-the-money call approaches 1; an at-the-money option sits around 0.5. Gamma, by contrast, peaks at the money.
11. Mark to market
A long futures position settles Rs 12 lower than the previous close. What happens to the margin account?
Answer: it is debited that day. Futures are settled daily, not at expiry — which is why a margin call can arrive long before the position is closed.
12. What the exchange removes
Which risk does an exchange-traded future eliminate that a forward does not?
Answer: counterparty risk, through novation — the clearing corporation becomes buyer to every seller and seller to every buyer. Market risk is untouched.
Scoring yourself
Fewer than eight right means you are not ready, and finding that out three weeks early is the point.
Notice the pattern: the failures are rarely conceptual. They are sign errors, forgetting the contract count, and forgetting to net the premium. Those are drill problems, not understanding problems — which is good news, because drilling is fast.
Remember VIII carries 25% negative marking, so on a question you cannot crack, eliminate first and only then commit.
ScoreSetu has 697 NISM VIII questions organised by the workbook's chapters, each with a worked explanation and a memory hook. Practise free, then take a timed mock.