Unit ko samjho · NISM Series XVI
Commodity Futures
22 questions is unit mein
Sawaal aur jawaab English mein hain, kyunki NISM ka exam paper bhi English mein hota hai.
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- A hypothetical metal future is quoted at ₹840 per kg and represents 2,500 kg. What is the notional value of one contract?
- A hypothetical grain future covers 10 tonnes and is quoted per quintal. Its tick size is ₹2 per quintal. What is one tick worth per contract? Use 1 tonne = 10 quintals.
- A trader buys 3 hypothetical copper futures, each for 1,000 kg, at ₹780 per kg and closes all at ₹792. Ignoring costs, what is the cumulative futures result?
- A trader sells 4 hypothetical energy futures at ₹6,200 per barrel. Each lot represents 50 barrels. All contracts are bought back at ₹6,275. Ignoring costs, what is the result?
- Two 500-kg futures are bought at ₹400/kg. Day 1 settlement is ₹410 and Day 2 settlement is ₹406. No position is closed. What is the Day 2 MTM cash flow, ignoring costs?
- A hypothetical futures position has ₹8,00,000 entry notional and ₹64,000 initial cash margin. It earns ₹16,000 before costs. What is profit as a percentage of the initial margin, with no further cash flows?
- Spot metal costs ₹1,000 per unit. For a six-month carry model, finance costs 8% a year on a simple basis and storage of ₹15 per unit is paid at maturity. With no other costs or benefits, what is the model futures price?
- Under a storage-free carry model, spot is ₹2,000 per unit and financing is 8% nominal a year compounded quarterly. What is the six-month model futures price, with no income or convenience yield?
- For a commodity, use F = S × exp[(r + u − y)T]. Spot S is ₹5,000, financing r is 6%, storage yield u is 2%, convenience yield y is 5%, and T is 0.5 year. All yields are continuously compounded. What is F to two decimals?
- A refinery keeps feedstock immediately available because a stockout would stop production. Which benefit is most closely described as convenience yield?
- An expiring deliverable metal future is compared with a spot quote for another grade at a distant location. Which adjustment is essential before concluding that convergence has failed?
- A fabric manufacturer needs an unusual delivery date and a quantity that is not a whole exchange lot. Which feature of a bilateral forward can help match those requirements more closely?
- A hypothetical contract defines its final reference as the simple average of three accepted spot polls: ₹4,120, ₹4,080 and ₹4,150 per unit. No rounding adjustment applies. What is that reference?
- A contract starts with open interest of 1,000. During the session, 120 contracts trade with both sides opening, 50 with both sides closing and 80 with one side opening and the other closing. What are closing open interest and session volume?
- A trader sells the near-month future previously bought and buys the next-month future. What has the trader done?
- In a hypothetical contract that permits negative quotations, a trader is long 100 units from ₹30 per unit and exits at −₹5. Ignoring costs, what is the loss?
- A hypothetical future permits prices on a ₹0.25 grid. Which quotation is valid?
- A carry model requires buying a commodity for ₹3,000 and paying ₹60 storage immediately. Both are financed for one year at 5% simple interest. With no other costs or benefits, what maturity amount must be recovered?
- A trader holds 5 long 100-unit futures from ₹500. Yesterday they settled at ₹508. Today 2 lots are sold at ₹512 and the remaining 3 settle at ₹510. Ignoring costs, what is today’s total MTM gain?
- Under F = S × exp[(r + u − y)T], all inputs except convenience yield remain fixed. Which condition produces F below S for a positive time to maturity?
- A metal inventory owner sells futures as a price hedge. The metal price rises, increasing inventory value but creating futures MTM payments before the inventory is sold. Which risk remains especially relevant?
- After buying a commodity future, a trader decides that the purchase price is unattractive. Which statement correctly distinguishes that future from a purchased call option?
Zaroori ideas
Practice bank se · 1
A hypothetical metal future is quoted at ₹840 per kg and represents 2,500 kg. What is the notional value of one contract?
The contract notional is the quoted price multiplied by the number of quotation units represented by the contract. The quotation is already per kg and the contains 2,500 kg. No tonne or quintal conversion is required. Notional value = ₹840/kg × 2,500 kg = ₹21,00,000. This is the exposure amount, not a statement that the full notional must be posted as . Remember: Convert the lot into the quotation unit before multiplying.
Hint Common mistake: Confusing per-unit price, total notional and margin.
XVI-009Practice bank se · 2
A hypothetical grain future covers 10 tonnes and is quoted per quintal. Its tick size is ₹2 per quintal. What is one tick worth per contract? Use 1 tonne = 10 quintals.
A tick is the smallest price increment, while tick value also depends on the number of quotation units in a lot. The lot contains 10 × 10 = 100 quintals. One tick changes each quintal’s value by ₹2. Contract tick value = 100 × ₹2 = ₹200. Remember: Tick value equals tick size times quotation units per contract.
Hint Common mistake: Multiplying a per-quintal price change by tonnes without conversion.
XVI-010Practice bank se · 3
A trader buys 3 hypothetical copper futures, each for 1,000 kg, at ₹780 per kg and closes all at ₹792. Ignoring costs, what is the cumulative futures result?
A long futures position gains when its closing price is above its entry price. Gain per kg = ₹792 − ₹780 = ₹12. Total quantity = 3 × 1,000 = 3,000 kg. Cumulative gain = ₹12 × 3,000 = ₹36,000. Daily settlement may have transferred parts of this amount earlier, but it does not create an additional second profit. Remember: Use the price difference, position direction and total quantity.
Hint Common mistake: Treating the closing notional as the trading profit.
XVI-011Practice bank se · 4
A trader sells 4 hypothetical energy futures at ₹6,200 per barrel. Each lot represents 50 barrels. All contracts are bought back at ₹6,275. Ignoring costs, what is the result?
A short futures position loses when it must be closed at a higher price. Loss per barrel = ₹6,275 − ₹6,200 = ₹75. Quantity = 4 × 50 = 200 barrels. Total loss = ₹75 × 200 = ₹15,000. A short position is calculated as entry selling price minus closing buying price. Remember: For a short future, subtract the buyback price from the sale price.
Hint Common mistake: Using the same gain direction for a long and a short position.
XVI-012Practice bank se · 5
Two 500-kg futures are bought at ₹400/kg. Day 1 settlement is ₹410 and Day 2 settlement is ₹406. No position is closed. What is the Day 2 MTM cash flow, ignoring costs?
After daily settlement, the next day’s MTM starts from the previous settlement price, not the original entry price. The total open quantity is 1,000 kg. Day 1 produces a ₹10 × 1,000 = ₹10,000 receipt. Day 2 change is ₹406 − ₹410 = −₹4/kg, giving a ₹4,000 payment. The net two-day receipt is ₹6,000, equal to (₹406 − ₹400) × 1,000. That cumulative result is not the Day 2 cash flow. Remember: Use yesterday’s settlement for today’s MTM and entry price for the cumulative result.
Hint Common mistake: Counting yesterday’s settled gain again.
XVI-013Practice bank se · 6
A hypothetical futures position has ₹8,00,000 entry notional and ₹64,000 initial cash margin. It earns ₹16,000 before costs. What is profit as a percentage of the initial margin, with no further cash flows?
Return percentages change when the denominator changes. Margin is not the same as the total underlying exposure. The requested denominator is ₹64,000, not the ₹8,00,000 contract notional. Profit relative to margin = ₹16,000 ÷ ₹64,000 × 100 = 25%. Relative to notional the same profit is 2%. This simplified margin return ignores any later margin calls. It does not mean that the investor’s possible loss is limited to the initial margin. Remember: Name the denominator whenever comparing a leveraged return.
Hint Common mistake: Presenting a return on margin as though it were the underlying commodity’s return.
XVI-014Practice bank se · 7
Spot metal costs ₹1,000 per unit. For a six-month carry model, finance costs 8% a year on a simple basis and storage of ₹15 per unit is paid at maturity. With no other costs or benefits, what is the model futures price?
A carry calculation must include financing and respect when a storage charge is paid. Six-month interest = ₹1,000 × 0.08 × 0.5 = ₹40. Storage is ₹15 payable at maturity, so it earns no further financing charge in this model. Model price = ₹1,000 + ₹40 + ₹15 = ₹1,055. The question fixes the model assumptions rather than asserting a current market price. Remember: The timing of a carrying charge affects whether it also incurs interest.
Hint Common mistake: Applying financing to every cost regardless of its payment date.
XVI-015Practice bank se · 8
Under a storage-free carry model, spot is ₹2,000 per unit and financing is 8% nominal a year compounded quarterly. What is the six-month model futures price, with no income or convenience yield?
A nominal annual rate must be divided by its compounding frequency and applied for the correct number of periods. Quarterly rate = 8% ÷ 4 = 2%. Six months contains two quarters. F = ₹2,000 × (1.02)² = ₹2,080.80. The second quarter also earns interest on the first quarter’s interest. Remember: Match both the periodic rate and the number of compounding periods.
Hint Common mistake: Using a nominal annual rate as a rate for each quarter.
XVI-016Practice bank se · 9
For a commodity, use F = S × exp[(r + u − y)T]. Spot S is ₹5,000, financing r is 6%, storage yield u is 2%, convenience yield y is 5%, and T is 0.5 year. All yields are continuously compounded. What is F to two decimals?
The net carrying rate includes storage and financing but subtracts the benefit of physical availability. Net annual carry = 0.06 + 0.02 − 0.05 = 0.03. The half-year exponent is 0.015. F = ₹5,000 × exp(0.015) = ₹5,075.5653…, rounded to ₹5,075.57. A positive convenience yield reduces the result relative to an otherwise identical model with zero convenience yield. Remember: Keep the sign of convenience yield separate from cash carrying costs.
Hint Common mistake: Adding every percentage as a cost.
XVI-017Practice bank se · 10
A refinery keeps feedstock immediately available because a stockout would stop production. Which benefit is most closely described as convenience yield?
Convenience yield is a non-cash benefit associated with holding usable physical inventory. The refinery can continue production because the material is already on hand. That availability has economic value even without a dividend payment. Financing and storage are carrying costs. A lower brokerage commission is a trading-cost reduction, not the physical availability benefit. Remember: Convenience yield concerns physical availability, not an interest or dividend cheque.
Hint Common mistake: Treating convenience yield as a guaranteed cash payment.
XVI-018Practice bank se · 11
An expiring deliverable metal future is compared with a spot quote for another grade at a distant location. Which adjustment is essential before concluding that convergence has failed?
Convergence is a comparison of economically equivalent deliverable exposures. A spot quote for a different grade or location may include a legitimate quality or logistics difference. The comparison must first reflect the same deliverable specification and timing. Only then can an unexplained remaining difference be evaluated. Remember: Convergence requires comparable goods and delivery terms.
Hint Common mistake: Testing convergence with an unrelated local spot quote.
XVI-019Practice bank se · 12
A fabric manufacturer needs an unusual delivery date and a quantity that is not a whole exchange lot. Which feature of a bilateral forward can help match those requirements more closely?
Customisation can improve exposure matching but is not the same as a guarantee against counterparty risk. A bilateral forward can be negotiated for a particular amount and date. Exchange futures use specified trading units and expiries. The parties still need to assess performance obligations, credit support and termination terms. Customisation does not remove those concerns. Remember: Compare matching flexibility separately from credit protection and .
Hint Common mistake: Assuming that a more customised hedge is better on every risk dimension.
XVI-083Practice bank se · 13
A hypothetical contract defines its final reference as the simple average of three accepted spot polls: ₹4,120, ₹4,080 and ₹4,150 per unit. No rounding adjustment applies. What is that reference?
A settlement calculation follows the stated methodology, not whichever observation looks most recent or representative. Sum of accepted observations = 4,120 + 4,080 + 4,150 = 12,350. Simple average = 12,350 ÷ 3 = ₹4,116.666…, approximately ₹4,116.67 per unit. The rule is hypothetical. It is not asserted to be the current method for every commodity contract. Remember: Apply the exact settlement method stated for the contract.
Hint Common mistake: Assuming that final settlement must equal the last observed price.
XVI-084Practice bank se · 14
A contract starts with open interest of 1,000. During the session, 120 contracts trade with both sides opening, 50 with both sides closing and 80 with one side opening and the other closing. What are closing open interest and session volume?
counts outstanding contracts once, whereas counts every contract traded during the session. Both-side opening adds 120 and both-side closing removes 50. A transfer between an opening and a closing participant leaves open interest unchanged. Closing open interest = 1,000 + 120 − 50 = 1,070. Volume = 120 + 50 + 80 = 250. A buyer and seller form one contract, not two separate contracts for these counts. Remember: Count contracts once and distinguish new exposure from transferred exposure.
Hint Common mistake: Equating volume with the increase in open interest.
XVI-085Practice bank se · 15
A trader sells the near-month future previously bought and buys the next-month future. What has the trader done?
A roll consists of separate closing and opening transactions in specified contracts. Selling offsets the earlier long in the near month. Buying creates a new long in the next month. The exchange has not altered the original contract’s . The new entry price and later maturity introduce a different subsequent exposure and may involve a roll spread and costs. Remember: A roll replaces exposure. It does not change the terms of an existing contract.
Hint Common mistake: Treating a roll as a costless administrative extension.
XVI-086Practice bank se · 16
In a hypothetical contract that permits negative quotations, a trader is long 100 units from ₹30 per unit and exits at −₹5. Ignoring costs, what is the loss?
The signed change in a futures price must be used even when the ending quotation is negative. The price change is −₹5 − ₹30 = −₹35 per unit. Loss = ₹35 × 100 = ₹3,500. Stopping the calculation at zero would omit the further ₹5 per unit decline. This is a stipulated hypothetical contract, not a claim that all commodity contracts permit negative quotations. Remember: Preserve minus signs when measuring a futures price change.
Hint Common mistake: Assuming that initial notional automatically caps every futures loss.
XVI-087Practice bank se · 17
A hypothetical future permits prices on a ₹0.25 grid. Which quotation is valid?
A tick grid restricts admissible price increments, not merely the number of decimal places shown. A price must be an exact multiple of ₹0.25. Fractional parts of .00, .25, .50 and .75 meet this grid. ₹812.75 qualifies. The other prices have two decimal places but do not lie on the specified grid. Remember: Decimal precision and valid tick increments are different checks.
Hint Common mistake: Assuming any two-decimal quotation is accepted.
XVI-088Practice bank se · 18
A carry model requires buying a commodity for ₹3,000 and paying ₹60 storage immediately. Both are financed for one year at 5% simple interest. With no other costs or benefits, what maturity amount must be recovered?
An upfront storage charge is part of the initial amount that has to be financed. Initial financed outlay = ₹3,000 + ₹60 = ₹3,060. One-year repayment = ₹3,060 × 1.05 = ₹3,213. This includes ₹3 interest on the upfront storage charge. Remember: Costs paid now and costs paid at maturity have different carrying amounts.
Hint Common mistake: Financing the commodity but not an upfront carrying charge.
XVI-089Practice bank se · 19
A trader holds 5 long 100-unit futures from ₹500. Yesterday they settled at ₹508. Today 2 lots are sold at ₹512 and the remaining 3 settle at ₹510. Ignoring costs, what is today’s total MTM gain?
Closed and still-open quantities use different current prices but the same previous settlement benchmark for today’s calculation. Closed quantity: 2 × 100 × (₹512 − ₹508) = ₹800. Remaining quantity: 3 × 100 × (₹510 − ₹508) = ₹600. Today’s total is ₹1,400. Yesterday’s cumulative ₹4,000 gain was already settled. Total gain through today is ₹5,400, not an extra amount payable today. Remember: Split closed and continuing quantities before calculating the day’s settlement.
Hint Common mistake: Reusing original entry price after earlier MTM has already been paid.
XVI-090Practice bank se · 20
Under F = S × exp[(r + u − y)T], all inputs except convenience yield remain fixed. Which condition produces F below S for a positive time to maturity?
The sign of net carry determines whether this specified model places futures above or below spot. For positive T, F is below S when the exponent (r + u − y)T is negative. That requires y > r + u. Equality gives F = S, while positive net carry gives F > S. This is model reasoning, not an assertion about the current market. Remember: Backwardation in a carry model requires the benefit of inventory to outweigh its carrying costs.
Hint Common mistake: Assuming storage costs alone make a futures discount impossible.
XVI-091Practice bank se · 21
A metal inventory owner sells futures as a price hedge. The metal price rises, increasing inventory value but creating futures MTM payments before the inventory is sold. Which risk remains especially relevant?
An economic offset does not necessarily provide cash at the time a derivative settlement is due. The higher inventory value may offset the futures loss economically. However, the inventory gain has not yet been converted into cash. The hedger needs resources for the settlement deadline. A sound risk comparison considers cash timing as well as ultimate price protection. Remember: Analyse funding timing separately from the ultimate economics of a hedge.
Hint Common mistake: Assuming that an unrealised inventory gain can automatically pay today’s margin call.
XVI-092Practice bank se · 22
After buying a commodity future, a trader decides that the purchase price is unattractive. Which statement correctly distinguishes that future from a purchased call option?
Futures obligations and option-holder rights produce different loss and settlement profiles. A futures position must be managed according to its contract, including closing or settlement. Posting initial margin does not purchase a right to abandon it. A call buyer pays for an option right. For a futures option, exercise can create a new futures position, so post-exercise obligations must also be understood. Remember: Identify obligations before comparing the upfront cash required by two products.
Hint Common mistake: Mistaking a relatively small futures margin for the price of a limited-loss option.
XVI-093Lot size is the number of units of the underlying that one derivatives contract stands for.
Aage padhoMargin is the money a participant must keep in place to carry a leveraged position.
Aage padhoLiquidity describes how easily a given quantity can be traded.
Aage padhoOpen Interest (OI) is the number of futures or options contracts in the NSE F&O segment that are still open.
Aage padhoTraded volume is the quantity that changed hands during a set period.
Aage padhoExpiry day is the last day on which a derivative contract can be traded.
Aage padho