Unit ko samjho · NISM Series V-D
Introduction to Forwards and Futures
15 questions is unit mein
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- A trader buys two hypothetical stock-futures contracts at ₹240 and closes both at ₹250. Each contract represents 50 shares. Ignoring all charges, what is the total profit? Assumptions: The 50-share multiplier is hypothetical. Charges are ignored.
- A trader sells three hypothetical futures contracts at ₹1,000 and buys them back at ₹980. Each contract represents 40 units. Ignoring costs, what is the profit? Assumptions: The contract multiplier is hypothetical. Transaction costs are ignored.
- A company negotiates a bilateral equity forward for an exact quantity and date. Before settlement, the contract has a large positive value to the company, but the counterparty becomes financially distressed. Which concern is most relevant?
- A trader holds one long listed futures contract. Which transaction ordinarily offsets that position, assuming the exchange recognises the trades as the same contract?
- For this question, basis is defined as spot price minus futures price. Spot is ₹520 and the relevant future is ₹527. What is the basis? Assumptions: Basis is explicitly defined as spot minus futures.
- A cash-settled equity future is finally settled against a specified underlying reference value at expiry. Which statement correctly describes convergence? Assumptions: The question specifies a cash-settled contract and its final reference convention.
- A hypothetical account starts with ₹45,000 margin. Its rules require a top-up to ₹45,000 whenever the balance falls below ₹35,000. A daily futures loss of ₹12,000 is debited, with no other changes. What top-up is required? Assumptions: The thresholds and replenishment rule are hypothetical account terms, not current exchange requirements.
- A trader is long three hypothetical futures contracts of 25 units each, opened at ₹100. The first daily settlement price is ₹97 and the second is ₹102. Both daily mark-to-market settlements occur and the position stays open. What is the second day’s credit, ignoring costs? Assumptions: The multiplier and prices are hypothetical. Both daily settlements occur. Costs are ignored.
- A share costs ₹800. Use the supplied simple-interest carry model F = S × (1 + rT), where r is an annual rate and T is years. The financing rate is 8% a year, maturity is three months, and no income or other costs apply. What is the model futures price? Assumptions: Use the stated simple-interest model. No dividend, fee or other carry item applies.
- A stock is ₹200, and the present value of a known dividend paid before expiry is ₹4. Use F = (S − present value of dividend) × (1 + rT). The annual simple financing rate is 6% and T is half a year. What is the theoretical forward price? Assumptions: The dividend present value is supplied and certain. Use the specified simple-interest formula.
- A share can be bought now for ₹100 and financed to an agreed delivery date for a total repayment of ₹103 per share. A matching forward can be sold at ₹108. Total additional execution and delivery charges are ₹2 per share. Assume no dividends, simultaneous execution, permitted delivery and no default. What net profit is locked in per share by buying the share and selling the forward? Assumptions: All matching, execution, financing, delivery and no-default assumptions are expressly supplied.
- A dealer observes a forward price below a calculated no-arbitrage value and proposes reverse cash-and-carry. Which practical requirement must be checked before assuming that selling the stock now and buying it forward is executable?
- A fund has a ₹50 lakh equity portfolio with estimated beta 1.20 to an index. The index future is 20,000 and its hypothetical multiplier is ₹25 per index point. Using contracts = beta × portfolio value ÷ futures contract value, which position approximately hedges the market exposure? Assumptions: Beta is an estimate. The multiplier is hypothetical. Basis changes, costs and rounding effects are ignored.
- A trader buys one near-month future at ₹100 and sells one far-month future at ₹104. Both hypothetical contracts cover 100 units. Later both are closed: the near future at ₹103 and the far future at ₹106. Ignoring costs and financing of daily settlements, what is combined profit or loss? Assumptions: The two multipliers are equal and hypothetical. Costs and financing of variation payments are ignored.
- A fund owns shares and sells futures as a hedge. The market rises sharply. The shares show an unrealised gain, but the short futures require an immediate cash variation payment. Why can the fund still face a liquidity problem?
Zaroori ideas
Practice bank se · 1
A trader buys two hypothetical stock-futures contracts at ₹240 and closes both at ₹250. Each contract represents 50 shares. Ignoring all charges, what is the total profit? Assumptions: The 50-share multiplier is hypothetical. Charges are ignored.
Profit = (₹250 − ₹240) × 2 × 50 = ₹1,000. The gain is calculated on the contracted quantity, not on the cash margin alone. Remember: Keep price units, contract multipliers and number of contracts consistent.
Hint Multiply the price change by total contracted shares.
V-D-084Practice bank se · 2
A trader sells three hypothetical futures contracts at ₹1,000 and buys them back at ₹980. Each contract represents 40 units. Ignoring costs, what is the profit? Assumptions: The contract multiplier is hypothetical. Transaction costs are ignored.
Profit = (₹1,000 − ₹980) × 3 × 40 = ₹2,400. The short position benefits from the decline in the futures price. Remember: The short and long payoff signs are opposite.
Hint For a short position, subtract the closing buy price from the opening sell price.
V-D-085Practice bank se · 3
A company negotiates a bilateral equity forward for an exact quantity and date. Before settlement, the contract has a large positive value to the company, but the counterparty becomes financially distressed. Which concern is most relevant?
The company is exposed to the other party’s ability to perform the bilateral agreement. A favourable market move can increase the amount at risk if the resulting contractual value cannot be recovered. Remember: Market gains and collectable gains are not always identical.
Hint A contractual entitlement has value only if performance occurs.
V-D-086Practice bank se · 4
A trader holds one long listed futures contract. Which transaction ordinarily offsets that position, assuming the exchange recognises the trades as the same contract?
A matching sale offsets the existing long futures position under the stated exchange treatment. A different expiry or underlying would create another position rather than close the first one. Remember: Contract identity matters when closing a derivative.
Hint An offset requires the opposite side of the identical contract.
V-D-087Practice bank se · 5
For this question, basis is defined as spot price minus futures price. Spot is ₹520 and the relevant future is ₹527. What is the basis? Assumptions: Basis is explicitly defined as spot minus futures.
Basis = ₹520 − ₹527 = −₹7. With this convention, a future trading above spot produces a negative basis. Remember: State the basis convention before interpreting its sign.
Hint Apply the definition in the question in the stated order.
V-D-088Practice bank se · 6
A cash-settled equity future is finally settled against a specified underlying reference value at expiry. Which statement correctly describes convergence? Assumptions: The question specifies a cash-settled contract and its final reference convention.
Final settlement ties the contract payoff to its defined reference value. Before expiry, a quoted futures price reflects market conditions and carry relationships rather than a guarantee of the later spot outcome. Remember: A contractual settlement reference is different from a forecast.
Hint Distinguish the settlement rule from a prediction made earlier.
V-D-089Practice bank se · 7
A hypothetical account starts with ₹45,000 margin. Its rules require a top-up to ₹45,000 whenever the balance falls below ₹35,000. A daily futures loss of ₹12,000 is debited, with no other changes. What top-up is required? Assumptions: The thresholds and replenishment rule are hypothetical account terms, not current exchange requirements.
The loss reduces margin to ₹45,000 − ₹12,000 = ₹33,000. Since this is below ₹35,000, a top-up of ₹45,000 − ₹33,000 = ₹12,000 is required. Remember: The trigger level and replenishment target can be different.
Hint Calculate the post-loss balance, then restore it to the required target.
V-D-090Practice bank se · 8
A trader is long three hypothetical futures contracts of 25 units each, opened at ₹100. The first daily settlement price is ₹97 and the second is ₹102. Both daily mark-to-market settlements occur and the position stays open. What is the second day’s credit, ignoring costs? Assumptions: The multiplier and prices are hypothetical. Both daily settlements occur. Costs are ignored.
The second day’s price change is ₹102 − ₹97 = ₹5. The credit is ₹5 × 3 × 25 = ₹375. The earlier ₹225 debit has already occurred separately. Remember: Daily variation payments must not be confused with cumulative trade profit.
Hint After daily settlement, measure the next day from the previous settlement price.
V-D-091Practice bank se · 9
A share costs ₹800. Use the supplied simple-interest carry model F = S × (1 + rT), where r is an annual rate and T is years. The financing rate is 8% a year, maturity is three months, and no income or other costs apply. What is the model futures price? Assumptions: Use the stated simple-interest model. No dividend, fee or other carry item applies.
The financing addition is ₹800 × 8% × 3/12 = ₹16. The model price is ₹800 + ₹16 = ₹816. Remember: Annual carry rates must be matched to the contract’s actual time period.
Hint Three months is one-quarter of a year.
V-D-092Practice bank se · 10
A stock is ₹200, and the present value of a known dividend paid before expiry is ₹4. Use F = (S − present value of dividend) × (1 + rT). The annual simple financing rate is 6% and T is half a year. What is the theoretical forward price? Assumptions: The dividend present value is supplied and certain. Use the specified simple-interest formula.
The financed net amount is ₹200 − ₹4 = ₹196. Applying the half-year factor 1 + 0.06 × 0.5 = 1.03 gives ₹196 × 1.03 = ₹201.88. Remember: Income and financing must be placed at consistent dates in a carry model.
Hint Remove the dividend’s present value before applying the financing factor.
V-D-093Practice bank se · 11
A share can be bought now for ₹100 and financed to an agreed delivery date for a total repayment of ₹103 per share. A matching forward can be sold at ₹108. Total additional execution and delivery charges are ₹2 per share. Assume no dividends, simultaneous execution, permitted delivery and no default. What net profit is locked in per share by buying the share and selling the forward? Assumptions: All matching, execution, financing, delivery and no-default assumptions are expressly supplied.
The forward sale provides ₹108 at delivery. Repaying ₹103 of financing and paying ₹2 of other charges leaves ₹108 − ₹103 − ₹2 = ₹3 under the stated matched-execution assumptions. Remember: An arbitrage spread must remain positive after all relevant costs.
Hint Compare fixed delivery receipts with every stated cost.
V-D-094Practice bank se · 12
A dealer observes a forward price below a calculated no-arbitrage value and proposes reverse cash-and-carry. Which practical requirement must be checked before assuming that selling the stock now and buying it forward is executable?
Reverse cash-and-carry requires the short cash-market leg to be feasible for the relevant period. Stock availability, borrowing charges, financing and settlement constraints can prevent an apparent quoted mispricing from being realised. Remember: A theoretical arbitrage must be tested for practical executability.
Hint The proposed cash-market sale may require stock that the dealer does not own.
V-D-095Practice bank se · 13
A fund has a ₹50 lakh equity portfolio with estimated beta 1.20 to an index. The index future is 20,000 and its hypothetical multiplier is ₹25 per index point. Using contracts = beta × portfolio value ÷ futures contract value, which position approximately hedges the market exposure? Assumptions: Beta is an estimate. The multiplier is hypothetical. Basis changes, costs and rounding effects are ignored.
One contract represents 20,000 × ₹25 = ₹5,00,000. The beta-adjusted exposure is 1.20 × ₹50,00,000 = ₹60,00,000, requiring 12 short contracts under this approximation. Remember: A market hedge needs both the correct direction and sensitivity-adjusted size.
Hint First find the rupee value of one futures contract.
V-D-096Practice bank se · 14
A trader buys one near-month future at ₹100 and sells one far-month future at ₹104. Both hypothetical contracts cover 100 units. Later both are closed: the near future at ₹103 and the far future at ₹106. Ignoring costs and financing of daily settlements, what is combined profit or loss? Assumptions: The two multipliers are equal and hypothetical. Costs and financing of variation payments are ignored.
The near-month long earns (103 − 100) × 100 = ₹300. The far-month short loses (104 − 106) × 100 = −₹200, leaving a net gain of ₹100. Remember: A spread trade depends on relative price movements, not just the market’s direction.
Hint Calculate the long and short legs separately before adding them.
V-D-097Practice bank se · 15
A fund owns shares and sells futures as a hedge. The market rises sharply. The shares show an unrealised gain, but the short futures require an immediate cash variation payment. Why can the fund still face a liquidity problem?
The hedge can offset market exposure while producing different cash-flow timing. The fund may need liquid resources for variation payments even though its shares have gained value. Remember: Risk reduction and management must be assessed separately.
Hint Compare when the two legs generate spendable cash.
V-D-098Liquidity in the stock market means how easily a quantity can be bought or sold.
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