Introduction to Forwards and Futures
15 questions. Each answer is explained.
Question 1 of 10Practice · Series V-D — Mutual Fund - Specialized Investment Fund Distributors
0 right · 0 wrong · 10 to go
A–D or 1–4 to answer · Enter or → for the next question · ← to go back
Learn these topics
More units in NISM Series V-D
- The Investment Landscape5
- Concept & Role of a Mutual Fund4
- Legal Structure of Mutual Funds in India3
- Legal and Regulatory Framework7
- Scheme Related Information7
- Fund Distribution and Channel Management Practices4
- Net Asset Value, Total Expense Ratio and Pricing of Units5
- Taxation3
- Investor Services10
- Risk, Return and Performance of Funds5
- Mutual Fund Scheme Performance5
- Mutual Fund Scheme Selection10
- Basics of Derivatives10
- Understanding Index5
- Introduction to Options13
- Strategies Using Equity Futures and Equity Options9
- Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Markets6
- Interest Rate Derivatives2
- Exchange Traded Interest Rate Futures10
- Exchange Traded Interest Rate Options6
- Strategies Using Interest Rate Derivatives6
Exam format
| Questions | 150 · 1 mark each |
|---|---|
| Duration | 180 min · 3 hours |
| Pass mark | 60% · 90 of 150 marks |
| Negative marking | 10% · 0.1 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 15 of 150 marks (10%) |
Source: July 2026 Annexure I, Chapter 15: Introduction to Forwards and Futures
NISM Series V-D Mutual Fund - Specialized Investment Fund Distributors
Exam rules read on NISM's site on 30 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 30 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 15 questions on Introduction to Forwards and Futures, with answers
Q1A 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.
Option A. ₹500
Why it is wrong: This accounts for only one of the two contracts.
Option B. ₹20
Why it is wrong: This multiplies the price change by contracts but omits shares per contract.
Option C. A loss of ₹1,000
Why it is wrong: A long futures position gains when its futures price rises.
Option D. ₹1,000 — Correct answer
Answer: D. 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, shown before you answer in practice mode: Multiply the price change by total contracted shares.
V-D-084easynumerical
Q2A 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.
Option A. ₹2,400 — Correct answer
Option B. A loss of ₹2,400
Why it is wrong: This reverses the payoff direction of a short position.
Option C. ₹800
Why it is wrong: This includes only one contract.
Option D. ₹60
Why it is wrong: This omits the 40-unit contract multiplier.
Answer: A. 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, shown before you answer in practice mode: For a short position, subtract the closing buy price from the opening sell price.
V-D-085easynumerical
Q3A 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?
Option A. The counterparty may fail to honour the valuable contractual obligation. — Correct answer
Option B. The company must own the counterparty’s shares.
Why it is wrong: The forward contract does not imply an ownership interest in its counterparty.
Option C. A positive contract value means the company cannot suffer any loss.
Why it is wrong: The company can lose the value it is owed if the other party defaults.
Option D. Customising the date automatically removes all credit exposure.
Why it is wrong: Customisation does not guarantee the other party’s ability to perform.
Answer: A. 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, shown before you answer in practice mode: A contractual entitlement has value only if performance occurs.
V-D-086mediumconceptual
Q4A trader holds one long listed futures contract. Which transaction ordinarily offsets that position, assuming the exchange recognises the trades as the same contract?
Option A. Buy a call option with the same underlying and the same expiry date.
Why it is wrong: The option is a separate contract and does not offset the futures position.
Option B. Buy one more contract with the same underlying and the same expiry.
Why it is wrong: This increases the long position instead of offsetting it.
Option C. Sell one contract with the same underlying, expiry and specifications. — Correct answer
Option D. Sell a different underlying with any expiry and any contract size.
Why it is wrong: That creates a different exposure and does not close the original contract.
Answer: C. 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, shown before you answer in practice mode: An offset requires the opposite side of the identical contract.
V-D-087easyapplication
Q5For 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.
Option A. +₹7
Why it is wrong: This uses futures minus spot instead of the stated convention.
Option B. −₹7 — Correct answer
Option C. ₹1,047
Why it is wrong: This adds the two prices.
Option D. Zero
Why it is wrong: The quoted spot and futures prices are different.
Answer: B. 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, shown before you answer in practice mode: Apply the definition in the question in the stated order.
V-D-088easynumerical
Q6A 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.
Option A. Spot and futures prices must be identical on every trading day, not only at the final settlement at expiry.
Why it is wrong: Financing, income and time to expiry can create differences before settlement.
Option B. The underlying must move to whatever futures price was quoted a month earlier, so that old quote is a reliable forecast.
Why it is wrong: An earlier quote does not bind the underlying’s future market level.
Option C. At final settlement, the contract is settled using that specified reference. Its earlier quoted price was not a guaranteed forecast. — Correct answer
Option D. An early positive basis guarantees a risk-free profit without any other trade, whatever happens before expiry.
Why it is wrong: A basis observation alone does not create a matched, cost-adjusted arbitrage.
Answer: C. 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, shown before you answer in practice mode: Distinguish the settlement rule from a prediction made earlier.
V-D-089mediumconceptual
Q7A 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.
Option A. ₹10,000
Why it is wrong: This is the difference between the two margin thresholds, not the actual shortfall.
Option B. ₹12,000 — Correct answer
Option C. ₹2,000
Why it is wrong: This restores the balance only to the trigger level of ₹35,000, not to ₹45,000.
Option D. Zero
Why it is wrong: After the loss, the balance is ₹33,000, below the trigger.
Answer: B. 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, shown before you answer in practice mode: Calculate the post-loss balance, then restore it to the required target.
V-D-090mediumnumerical
Q8A 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.
Option A. A debit of ₹375
Why it is wrong: A long position gains when the settlement price rises from ₹97 to ₹102.
Option B. ₹150
Why it is wrong: This is the cumulative gain from the opening price through day two, not the second day alone.
Option C. ₹225
Why it is wrong: This is the magnitude of the first day’s debit.
Option D. ₹375 — Correct answer
Answer: D. 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, shown before you answer in practice mode: After daily settlement, measure the next day from the previous settlement price.
V-D-091mediumnumerical
Q9A 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.
Option A. ₹816 — Correct answer
Option B. ₹864
Why it is wrong: This charges a full year of financing instead of three months.
Option C. ₹806.40
Why it is wrong: This does not apply the stated three-month fraction correctly.
Option D. ₹784
Why it is wrong: This subtracts positive financing cost instead of adding it.
Answer: A. 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, shown before you answer in practice mode: Three months is one-quarter of a year.
V-D-092mediumnumerical
Q10A 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.
Option A. ₹201.88 — Correct answer
Option B. ₹210.12
Why it is wrong: This adds the dividend present value instead of subtracting it.
Option C. ₹206.00
Why it is wrong: This ignores the dividend’s present value.
Option D. ₹202.00
Why it is wrong: This deducts ₹4 after carrying the full stock price, contrary to the supplied formula.
Answer: A. 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, shown before you answer in practice mode: Remove the dividend’s present value before applying the financing factor.
V-D-093hardnumerical
Q11A 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.
Option A. ₹5
Why it is wrong: This deducts financing but omits the ₹2 charges.
Option B. ₹7
Why it is wrong: This adds the charges rather than deducting them after financing.
Option C. ₹8
Why it is wrong: This ignores financing and additional charges.
Option D. ₹3 — Correct answer
Answer: D. 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, shown before you answer in practice mode: Compare fixed delivery receipts with every stated cost.
V-D-094hardnumerical
Q12A 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?
Option A. Whether all stock-borrowing costs can always be ignored when the forward looks cheap enough.
Why it is wrong: Borrowing costs can remove the apparent price advantage.
Option B. Whether a low forward quote alone guarantees a profit of any size, without any further checks.
Why it is wrong: The complete executable trade and its costs determine whether an opportunity exists.
Option C. The ability and cost to borrow and short-sell the stock and maintain that position until settlement. — Correct answer
Option D. Whether the forward buyer automatically owns the stock today and can sell it straight away.
Why it is wrong: A forward purchase is a future contractual exposure, not present stock ownership.
Answer: C. 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, shown before you answer in practice mode: The proposed cash-market sale may require stock that the dealer does not own.
V-D-095mediumapplication
Q13A 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.
Option A. Sell 12 contracts. — Correct answer
Option B. Buy 12 contracts.
Why it is wrong: Buying futures adds positive market exposure instead of offsetting it.
Option C. Sell 120 contracts.
Why it is wrong: This overstates the number by a factor of ten.
Option D. Sell 10 contracts.
Why it is wrong: This matches portfolio value but ignores beta of 1.20.
Answer: A. 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, shown before you answer in practice mode: First find the rupee value of one futures contract.
V-D-096hardnumerical
Q14A 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.
Option A. A loss of ₹100.
Why it is wrong: This reverses the combined result.
Option B. A profit of ₹100. — Correct answer
Option C. A profit of ₹500.
Why it is wrong: This incorrectly treats the far-month short position’s price rise as a gain.
Option D. A profit of ₹300.
Why it is wrong: This includes the near-month gain but omits the far-month loss.
Answer: B. 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, shown before you answer in practice mode: Calculate the long and short legs separately before adding them.
V-D-097hardnumerical
Q15A 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?
Option A. An economic hedge guarantees identical cash-flow timing.
Why it is wrong: Offsetting economic values need not generate cash on the same date.
Option B. The futures cash outflow can occur before the offsetting share gain is realised in cash. — Correct answer
Option C. An unrealised share gain automatically arrives as available cash.
Why it is wrong: The gain may remain embedded in an unsold holding.
Option D. The short futures must have a positive daily settlement when the market rises.
Why it is wrong: A rising futures price normally produces a loss for a short position.
Answer: B. 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 liquidity management must be assessed separately.
Hint, shown before you answer in practice mode: Compare when the two legs generate spendable cash.
V-D-098mediumapplication
Introduction to Forwards and Futures: common questions
How many practice questions are there on Introduction to Forwards and Futures?
15 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 22 practice topics for NISM Series V-D, which has 150 questions in total.
Are these real NISM Series V-D questions on Introduction to Forwards and 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.
How much of the NISM Series V-D exam is Introduction to Forwards and Futures?
NISM's published syllabus outline gives it 15 of the paper's 150 marks, or 10% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: July 2026 Annexure I, Chapter 15: Introduction to Forwards and Futures
Does negative marking apply to NISM Series V-D?
Yes. NISM takes off 10% of a question's marks for a wrong answer. On a 1-mark question that is 0.1 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.
Introduction to Options
13 questions on Introduction to Options. Its quiz opens on that unit.
Open Introduction to OptionsPaper Trading Try it on the practice trading desk