Commodity Futures
22 questions. Each answer is explained.
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Learn these topics
More units in NISM Series XVI
- Introduction to Commodity Markets15
- Commodity Options22
- Commodity Indices12
- Uses of Commodity Derivatives23
- Trading Mechanism13
- Clearing Settlement and Risk Management of Commodity Derivatives20
- Accounting and Taxation8
- Legal & Regulatory Environment of Commodity Derivatives8
- Code of Conduct and Investor Protection Measures7
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series XVI Commodity Derivatives
Exam rules read on NISM's site on 3 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 3 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 22 questions on Commodity Futures, with answers
Q1A hypothetical metal future is quoted at ₹840 per kg and represents 2,500 kg. What is the notional value of one contract?
Option A. ₹33,600
Why it is wrong: Dividing or using an unrelated multiplier does not give the value of 2,500 kg.
Option B. ₹21,00,000 — Correct answer
Option C. ₹2,10,000
Why it is wrong: This understates the lot multiplier by a factor of ten.
Option D. ₹840
Why it is wrong: ₹840 is the price of one kg, not one futures lot.
Answer: B. 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 lot 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 margin. Remember: Convert the lot into the quotation unit before multiplying.
Hint, shown before you answer in practice mode: Common mistake: Confusing per-unit price, total notional and margin.
XVI-009easynumerical
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.
Option A. ₹2
Why it is wrong: This is the price tick before applying the contract quantity.
Option B. ₹200 — Correct answer
Option C. ₹2,000
Why it is wrong: This adds an unnecessary extra factor of ten after converting tonnes to quintals.
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
Q3A 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?
Option A. ₹23,76,000 profit
Why it is wrong: This is closing notional, not the change in value.
Option B. ₹36,000 profit — Correct answer
Option C. ₹12,000 profit
Why it is wrong: This includes only one of the three contracts.
Option D. ₹36,000 loss
Why it is wrong: This reverses the sign of a long position’s gain.
Answer: B. 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, shown before you answer in practice mode: Common mistake: Treating the closing notional as the trading profit.
XVI-011easynumerical
Q4A 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?
Option A. ₹15,000 loss — Correct answer
Option B. ₹15,000 profit
Why it is wrong: This applies the long-position sign to a short position.
Option C. ₹3,750 loss
Why it is wrong: This is the loss on only one 50-barrel contract.
Option D. ₹1,25,500 loss
Why it is wrong: This does not apply the ₹75 price difference to the stated quantity.
Answer: A. 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, shown before you answer in practice mode: Common mistake: Using the same gain direction for a long and a short position.
XVI-012easynumerical
Q5Two 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?
Option A. ₹4,000 received
Why it is wrong: The magnitude is correct but the long position loses on the Day 2 fall.
Option B. ₹10,000 received
Why it is wrong: This repeats the amount already settled on Day 1.
Option C. ₹6,000 received
Why it is wrong: This is the cumulative entry-to-Day-2 profit, not Day 2 alone.
Option D. ₹4,000 paid — Correct answer
Answer: D. 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, shown before you answer in practice mode: Common mistake: Counting yesterday’s settled gain again.
XVI-013mediumnumerical
Q6A 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?
Option A. 2%
Why it is wrong: This is profit divided by entry notional.
Option B. 25% — Correct answer
Option C. 20%
Why it is wrong: This uses neither of the stated return denominators correctly.
Option D. 8%
Why it is wrong: This is initial margin as a percentage of notional, not a profit return.
Answer: B. 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, shown before you answer in practice mode: Common mistake: Presenting a return on margin as though it were the underlying commodity’s return.
XVI-014mediumnumerical
Q7Spot 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?
Option A. ₹1,055 — Correct answer
Option B. ₹1,055.60
Why it is wrong: It incorrectly finances the ₹15 as though paid at inception.
Option C. ₹1,040
Why it is wrong: It omits the ₹15 storage cost.
Option D. ₹1,095
Why it is wrong: It applies a whole year’s ₹80 interest instead of six months.
Answer: A. 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, shown before you answer in practice mode: Common mistake: Applying financing to every cost regardless of its payment date.
XVI-015mediumnumerical
Q8Under 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?
Option A. ₹2,160.00
Why it is wrong: This charges a full 8% for the six-month period.
Option B. ₹2,080.00
Why it is wrong: This uses simple half-year interest and omits ₹0.80 interest on interest.
Option C. ₹2,040.00
Why it is wrong: This counts only one quarter.
Option D. ₹2,080.80 — Correct answer
Answer: D. 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, shown before you answer in practice mode: Common mistake: Using a nominal annual rate as a rate for each quarter.
XVI-016mediumnumerical
Q9For 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?
Option A. ₹5,075.57 — Correct answer
Option B. ₹4,925.56
Why it is wrong: This reverses the sign of the net carry.
Option C. ₹5,331.71
Why it is wrong: This adds the convenience yield rather than subtracting it.
Option D. ₹5,204.05
Why it is wrong: This omits the convenience-yield benefit and uses an 8% annual carry.
Answer: A. 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, shown before you answer in practice mode: Common mistake: Adding every percentage as a cost.
XVI-017hardnumerical
Q10A refinery keeps feedstock immediately available because a stockout would stop production. Which benefit is most closely described as convenience yield?
Option A. The interest invoice paid on the bank loan that financed the inventory
Why it is wrong: Loan interest is a financing cost, not convenience yield.
Option B. The cash rental paid to the warehouse holding the feedstock
Why it is wrong: Warehouse rental is a storage cost.
Option C. The futures broker’s commission discount on the refinery’s hedge trades
Why it is wrong: A brokerage discount is unrelated to having feedstock available at the refinery.
Option D. The operating benefit of having the physical material available — Correct answer
Answer: D. 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, shown before you answer in practice mode: Common mistake: Treating convenience yield as a guaranteed cash payment.
XVI-018mediumconceptual
Q11An 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?
Option A. Align the grade, location and relevant delivery terms — Correct answer
Option B. Replace the futures price with the original margin deposit
Why it is wrong: Margin is collateral, not a commodity price benchmark.
Option C. Use any other expiry that gives a closer numerical match
Why it is wrong: Changing expiry avoids rather than answers the like-for-like maturity comparison.
Option D. Compare only the names of the two metals
Why it is wrong: A common metal name does not establish equivalent quality or delivery location.
Answer: A. 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, shown before you answer in practice mode: Common mistake: Testing convergence with an unrelated local spot quote.
XVI-019mediumconceptual
Q12A 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?
Option A. Mandatory conformity to one exchange expiry and lot
Why it is wrong: This describes the standardisation constraint the manufacturer is trying to avoid.
Option B. Negotiation of quantity and delivery date — Correct answer
Option C. A right to cancel without any contractual consequence
Why it is wrong: Cancellation rights depend on agreed terms and are not created merely by choosing a forward.
Option D. Automatic elimination of counterparty credit risk
Why it is wrong: A bilateral promise can still expose the parties to default risk.
Answer: B. 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 liquidity.
Hint, shown before you answer in practice mode: Common mistake: Assuming that a more customised hedge is better on every risk dimension.
XVI-083mediumconceptual
Q13A 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?
Option A. ₹4,150.00
Why it is wrong: This uses only the last quoted observation.
Option B. ₹4,115.00
Why it is wrong: This averages the lowest and highest observations while ignoring the middle one.
Option C. ₹4,080.00
Why it is wrong: This selects only the lowest observation.
Option D. ₹4,116.67 — Correct answer
Answer: D. 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, shown before you answer in practice mode: Common mistake: Assuming that final settlement must equal the last observed price.
XVI-084mediumnumerical
Q14A 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?
Option A. 1,070 and 250 contracts — Correct answer
Option B. 1,070 and 170 contracts
Why it is wrong: It omits the 80 transferred contracts from volume.
Option C. 2,140 and 500 contracts
Why it is wrong: It double-counts the buyer and seller sides.
Option D. 1,250 and 250 contracts
Why it is wrong: It incorrectly adds every trade to open interest.
Answer: A. Open interest counts outstanding contracts once, whereas volume 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, shown before you answer in practice mode: Common mistake: Equating volume with the increase in open interest.
XVI-085mediumnumerical
Q15A trader sells the near-month future previously bought and buys the next-month future. What has the trader done?
Option A. Converted the original future into a perpetual physical holding
Why it is wrong: The new position still has an expiry and is not a physical perpetual holding.
Option B. Extended the expiry date of the original exchange contract
Why it is wrong: Individual traders cannot rewrite an exchange contract’s expiry by rolling.
Option C. Closed one contract position and opened a different-expiry position — Correct answer
Option D. Cancelled all price exposure without creating a new position
Why it is wrong: The near-month exposure is closed but next-month exposure is opened.
Answer: C. 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 expiry. 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, shown before you answer in practice mode: Common mistake: Treating a roll as a costless administrative extension.
XVI-086mediumconceptual
Q16In 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?
Option A. ₹2,500
Why it is wrong: This treats the negative endpoint as a positive ₹5 price.
Option B. ₹3,500 — Correct answer
Option C. ₹500
Why it is wrong: This includes only the distance from zero to the exit price.
Option D. ₹3,000
Why it is wrong: This incorrectly floors the exit price at zero.
Answer: B. 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, shown before you answer in practice mode: Common mistake: Assuming that initial notional automatically caps every futures loss.
XVI-087mediumnumerical
Q17A hypothetical future permits prices on a ₹0.25 grid. Which quotation is valid?
Option A. ₹812.75 — Correct answer
Option B. ₹812.90
Why it is wrong: A fractional part of .90 is not a quarter-rupee increment.
Option C. ₹812.80
Why it is wrong: A fractional part of .80 is not a quarter-rupee increment.
Option D. ₹812.70
Why it is wrong: A fractional part of .70 is not a quarter-rupee increment.
Answer: A. 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, shown before you answer in practice mode: Common mistake: Assuming any two-decimal quotation is accepted.
XVI-088easynumerical
Q18A 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?
Option A. ₹3,150
Why it is wrong: It omits the entire storage cost and its financing.
Option B. ₹3,210
Why it is wrong: It adds storage only at maturity and misses ₹3 of financing on storage.
Option C. ₹3,060
Why it is wrong: It omits all financing cost.
Option D. ₹3,213 — Correct answer
Answer: D. 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, shown before you answer in practice mode: Common mistake: Financing the commodity but not an upfront carrying charge.
XVI-089mediumnumerical
Q19A 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?
Option A. ₹1,400 — Correct answer
Option B. ₹2,000
Why it is wrong: This applies the ₹512 exit to all five lots, including the three not sold.
Option C. ₹5,400
Why it is wrong: This is the cumulative gain measured from the original ₹500 entry.
Option D. ₹1,000
Why it is wrong: This applies ₹510 to all five lots and ignores the higher actual exit for two.
Answer: A. 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, shown before you answer in practice mode: Common mistake: Reusing original entry price after earlier MTM has already been paid.
XVI-090hardnumerical
Q20Under 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?
Option A. Storage yield exceeds convenience yield with financing positive
Why it is wrong: This leaves a positive carrying cost rather than producing the requested discount.
Option B. Convenience yield exceeds financing plus storage yields — Correct answer
Option C. Every input yield is zero
Why it is wrong: Zero yields also imply equality, not a discount.
Option D. Convenience yield equals financing plus storage yields
Why it is wrong: This makes net carry zero and futures equal to spot.
Answer: B. 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, shown before you answer in practice mode: Common mistake: Assuming storage costs alone make a futures discount impossible.
XVI-091mediumconceptual
Q21A 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?
Option A. A guaranteed fall in the combined economic position
Why it is wrong: The facts describe an offsetting inventory gain, so an overall loss is not guaranteed.
Option B. The disappearance of the inventory’s market value
Why it is wrong: The inventory has risen in value, not disappeared.
Option C. A contractual right to postpone all MTM until inventory sale
Why it is wrong: The hedge’s purpose does not create a right to ignore its settlement terms.
Option D. Short-term liquidity needed to meet cash settlements — Correct answer
Answer: D. 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, shown before you answer in practice mode: Common mistake: Assuming that an unrealised inventory gain can automatically pay today’s margin call.
XVI-092mediumconceptual
Q22After buying a commodity future, a trader decides that the purchase price is unattractive. Which statement correctly distinguishes that future from a purchased call option?
Option A. The future creates contractual obligations, while the call gives a right under its terms — Correct answer
Option B. The future’s buyer alone can require the seller to refund any losses on the trade
Why it is wrong: A futures buyer has no unilateral refund right merely because the market moved adversely.
Option C. The future automatically expires worthless whenever the spot price falls below the entry price
Why it is wrong: A long future loses value when prices fall and does not become a zero-obligation option.
Option D. Both can simply be abandoned, with the loss limited to the initial margin paid
Why it is wrong: Initial margin is not an option premium or a universal maximum loss.
Answer: A. 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, shown before you answer in practice mode: Common mistake: Mistaking a relatively small futures margin for the price of a limited-loss option.
XVI-093easyconceptual
Commodity Futures: common questions
How many practice questions are there on Commodity Futures?
22 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 10 practice topics for NISM Series XVI, which has 150 questions in total.
Are these real NISM Series XVI questions on Commodity Futures?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series XVI?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Commodity Options
22 questions on Commodity Options. Its quiz opens on that unit.
Open Commodity Options