NISM VIII Options — Practice Questions
The largest chapter in the VIII syllabus. Practise calls and puts, moneyness, intrinsic and time value, the option Greeks (delta, gamma, theta, vega), option pricing, and payoff calculations for buyers and writers.
154 questions on Options in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Calls, puts and moneyness
- Intrinsic value vs time value
- Delta, gamma, theta, vega
- Payoffs for buyer and writer
Free sample questions
1. Two stocks A and B stocks are quoted at Rs 500 per share. Keeping everything else constant, if A is more volatile than B, which ‘Put’ will be priced higher ?
- A. The put of stock A ✅
- B. The put of stock B
- C. Both the puts will be equally priced
Answer: A — The put of stock A
Why: Vega, which measure of the sensitivity of an option price to changes in market volatility is positive for a long call and a long put. An increase in the volatility of the underlying increases the expected payout from a buy option, whether it is a call or a put.
💡 Higher volatility -> higher premium; Vega is POSITIVE for both calls AND puts, so A's put costs more.
2. The option premium is affected by the difference in the exercise price and the spot price - State True or False ?
- A. True ✅
- B. False
Answer: A — True
Why: The price difference between exercise price ( strike price ) and the spot price (market price) is always reflected in the option premium pricing. Generally as the gap increases, the premium increases and vice versa. For eg - If the spot price of a share is Rs 100 and the strike price is Rs 90, than the call option preimum will be Rs 10 (100 - 90) plus premium for time to expiry, volatility etc. If the spot price rises to Rs 110, than the call option premium will generally rise to Rs 20 (110-90) plus premium for time to expiry, volatility etc
💡 Bigger gap between spot and strike -> bigger intrinsic value -> higher premium. TRUE.
3. When an option moves further In-The-Money, the absolute value of its delta will _____ .
- A. Increase ✅
- B. Decrease
- C. Level out
- D. Go towards becoming zero
Answer: A — Increase
Why: Delta measures the sensitivity of an option’s price to a change in the price of the underlying asset. For a call option, delta ranges from 0 to 1, and for a put option, it ranges from 0 to -1. As an option becomes more in-the-money (i.e., the stock price moves further above the strike price for a call or below it for a put), its delta approaches 1 (for calls) or -1 (for puts) in absolute terms. This is because the option behaves more like the underlying asset, with a higher probability of being exercised. Thus, the absolute value of delta increases.
💡 Deeper ITM -> |delta| RISES toward 1 (call) / -1 (put); option starts mimicking the underlying.
Practise all 154 Options questions
Plus the full 697-question NISM VIII bank and real-feel mock exams.