NISM Series 16 Mock Test 1: Free Commodity Derivatives Paper

How this mock is marked

• 50 questions, one mark each.
• 60 minutes on the clock. That is the real exam's pace: 120 minutes for 100 questions.
• A wrong answer loses a quarter of a mark. A blank loses nothing.
• You pass with 60% or more.
• Submit to see your score and the chapters to work on. Then check each right answer and why it is right.

What this paper covers

50 questions from 10 chapters. Each chapter gets a share that follows our question bank.

• Introduction to Commodity Markets: 5 questions.
• Commodity Futures: 8 questions.
• Commodity Options: 7 questions.
• Commodity Indices: 4 questions.
• Uses of Commodity Derivatives: 7 questions.
• Trading Mechanism: 5 questions.
• Clearing Settlement and Risk Management of Commodity Derivatives: 7 questions.
• Accounting and Taxation: 2 questions.
• Legal & Regulatory Environment of Commodity Derivatives: 3 questions.
• Code of Conduct and Investor Protection Measures: 2 questions.

By level: Beginner 11 · Intermediate 33 · Advanced 6.

Chapter split of Mock 1

How Mock 1 shares its questions between chapters and levels. This split belongs to this paper. The other mocks of this exam have their own.

• Introduction to Commodity Markets: Beginner 2 · Intermediate 3 · Advanced 0.
• Commodity Futures: Beginner 2 · Intermediate 5 · Advanced 1.
• Commodity Options: Beginner 1 · Intermediate 5 · Advanced 1.
• Commodity Indices: Beginner 1 · Intermediate 3 · Advanced 0.
• Uses of Commodity Derivatives: Beginner 0 · Intermediate 5 · Advanced 2.
• Trading Mechanism: Beginner 3 · Intermediate 2 · Advanced 0.
• Clearing Settlement and Risk Management of Commodity Derivatives: Beginner 2 · Intermediate 4 · Advanced 1.
• Accounting and Taxation: Beginner 0 · Intermediate 2 · Advanced 0.
• Legal & Regulatory Environment of Commodity Derivatives: Beginner 0 · Intermediate 2 · Advanced 1.
• Code of Conduct and Investor Protection Measures: Beginner 0 · Intermediate 2 · Advanced 0.

3 sample questions, with answers

These 3 questions are not in Mock 1, so reading them spoils nothing here. They come from Mock 3 of this exam. Each one shows the hint, the answer and why every wrong option is wrong.

1. Q1A fabricator buys futures covering 8,000 kg at ₹200 per kg. It later buys the physical input at ₹218 and closes the futures at ₹215 per kg. What is its net input cost after the futures result? Ignore charges.

   • A

     Option A. ₹16,00,000

     Why it is wrong: It assumes the closing physical and futures prices are identical, although they differ by ₹3 per kg.

   • B

     Option B. ₹18,64,000

     Why it is wrong: It adds the gain as another cost rather than using it to offset the purchase.

   • C

     Option C. ₹17,44,000

     Why it is wrong: It ignores the futures gain.

   • D

     Option D. ₹16,24,000 — Correct answer

   Answer: D. A prospective buyer offsets a rising physical purchase price with gains on a long futures hedge. Physical payment = 8,000 × ₹218 = ₹17,44,000. Long futures gain = 8,000 × (₹215 − ₹200) = ₹1,20,000. Net purchase cost = ₹17,44,000 − ₹1,20,000 = ₹16,24,000, or ₹203 per kg. Remember: For a buyer, subtract hedge gains from the physical purchase cost and add hedge losses.

   Hint, shown before you answer in practice mode: Common mistake: Using the same addition rule for a buyer’s cost and a seller’s receipt without considering cash-flow signs.

   XVI-038mediumnumerical

   Study this unit

2. Q2A 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

     Option A. ₹2

     Why it is wrong: This is the price tick before applying the contract quantity.

   • B

     Option B. ₹200 — Correct answer

   • C

     Option C. ₹2,000

     Why it is wrong: This adds an unnecessary extra factor of ten after converting tonnes to quintals.

   • D

     Option D. ₹20

     Why it is wrong: This treats the 10-tonne quantity as only 10 quotation units.

   Answer: B. 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, shown before you answer in practice mode: Common mistake: Multiplying a per-quintal price change by tonnes without conversion.

   XVI-010mediumnumerical

   Study this unit

3. Q3A call and put on the same future have strike ₹1,000 and the same expiry. Their premiums are ₹42 and ₹27. A trader buys the call and writes the put. At expiry the future is ₹980. Ignoring financing and costs, what is the combined net result per unit?

   • A

     Option A. ₹15 profit

     Why it is wrong: The ₹15 is an initial payment, not a final profit.

   • B

     Option B. ₹20 loss

     Why it is wrong: This excludes the net premium paid.

   • C

     Option C. ₹35 loss — Correct answer

   • D

     Option D. ₹5 loss

     Why it is wrong: This credits rather than debits the initial net premium.

   Answer: C. A long call plus short put has a linear strike-based expiry payoff, but net profit must also include its initial net premium. Initial net premium paid = ₹42 − ₹27 = ₹15. At ₹980, the call payoff is zero and the written put owes ₹20. Combined expiry payoff = ₹980 − ₹1,000 = −₹20. Including the initial debit gives −₹20 − ₹15 = −₹35. This is a payoff calculation only. The question does not assert that the supplied premiums and an unspecified current futures price satisfy parity. Remember: Synthetic payoff identities do not eliminate the initial premium cash flow.

   Hint, shown before you answer in practice mode: Common mistake: Equating a terminal payoff identity with equal net profit from any acquisition price.

   XVI-103hardnumerical

   Study this unit

Then take Mock 2

Read the chapters your result names first. A new paper then shows whether those gaps have closed.