Strategies Using Equity Futures and Equity Options
9 questions. Each answer is explained.
Question 1 of 9Practice · Series V-D — Mutual Fund - Specialized Investment Fund Distributors
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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 Forwards and Futures15
- Introduction to Options13
- 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 | 9 of 150 marks (6%) |
Source: July 2026 Annexure I, Chapter 17: Strategies Using Equity Futures and Equity Options
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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 9 questions on Strategies Using Equity Futures and Equity Options, with answers
Q1An investor owns a share and wants to retain its upside while obtaining an expiry floor on its selling value. The investor is willing to pay an option premium. Which basic strategy most directly fits this objective?
Option A. Keep the share and sell an uncovered put.
Why it is wrong: Selling a put adds downside exposure rather than providing a selling-value floor.
Option B. Keep the share and buy a put on the same quantity. — Correct answer
Option C. Keep the share and buy another identical share.
Why it is wrong: That doubles equity exposure without providing a contractual floor.
Option D. Sell the share and buy nothing else.
Why it is wrong: This removes the share’s future upside as well as its downside exposure.
Answer: B. A protective put combines the owned share with a put on the same quantity. At expiry the put can establish a floor before accounting for the premium, while gains above the strike remain available from the share. Remember: Protection has a cost, which must be included in the strategy’s overall result.
Hint, shown before you answer in practice mode: A put gives its buyer a right to sell at a strike.
V-D-112easyapplication
Q2An investor buys a share for ₹100 and writes a call on that share with strike ₹110, receiving ₹4 premium. The investor holds the share and keeps the call position open until the option expires. Ignoring dividends and charges, what is the maximum net profit per share? Assumptions: Both legs cover the same share quantity and are evaluated at the option expiry. Dividends and charges are ignored.
Option A. ₹10
Why it is wrong: This includes the share’s maximum gain but omits the call premium.
Option B. Unlimited profit.
Why it is wrong: The written call offsets share gains beyond its strike at expiry.
Option C. ₹14 — Correct answer
Option D. ₹4
Why it is wrong: This includes only premium and ignores the possible share-price gain up to the strike.
Answer: C. The share gain retained up to the strike is ₹110 − ₹100 = ₹10. Adding the ₹4 premium gives a maximum net profit of ₹14. Above ₹110 the written call offsets further share gains. Remember: A covered call exchanges some upside participation for premium income.
Hint, shown before you answer in practice mode: At or above the strike, combine the capped share gain with premium received.
V-D-113mediumnumerical
Q3A trader buys a call with strike ₹100 for ₹8 and sells a call with strike ₹110 for ₹3. Both have the same underlying, quantity and expiry. Ignoring costs, what is the maximum net profit per underlying unit? Assumptions: The legs have matching underlying, quantity and expiry. Fees are excluded.
Option A. ₹15
Why it is wrong: This adds the net premium outflow rather than subtracting it.
Option B. ₹8
Why it is wrong: This is the purchased call’s premium, not the strategy profit.
Option C. ₹10
Why it is wrong: This is the maximum gross expiry payoff before deducting the net premium.
Option D. ₹5 — Correct answer
Answer: D. The net premium paid is ₹8 − ₹3 = ₹5. The maximum expiry payoff is the ₹10 strike width, so maximum net profit is ₹10 − ₹5 = ₹5. Remember: A debit spread’s maximum profit is its capped payoff less its initial net cost.
Hint, shown before you answer in practice mode: Subtract the net debit from the strike width.
V-D-114mediumnumerical
Q4A trader buys a call and a put with the same strike of ₹100 and the same expiry. The call costs ₹7 and the put ₹5 per unit. Ignoring fees, what are the two underlying prices at expiry where the combined position breaks even? Assumptions: Both options have the same underlying, strike, quantity and expiry. Costs are ignored.
Option A. ₹88 and ₹112 — Correct answer
Option B. ₹95 and ₹107
Why it is wrong: These use the individual premiums instead of the total cost of both options.
Option C. ₹100 and ₹112
Why it is wrong: At ₹100 both options have zero expiry payoff and the full premium is lost.
Option D. ₹93 and ₹105
Why it is wrong: These attach only one leg’s premium to each side and ignore the other leg.
Answer: A. Total premium is ₹7 + ₹5 = ₹12. At expiry the combined payoff is the absolute movement from ₹100, so break-even prices are ₹100 − ₹12 = ₹88 and ₹100 + ₹12 = ₹112. Remember: Buying volatility through a straddle requires a large enough move to recover its total cost.
Hint, shown before you answer in practice mode: The movement away from the common strike must recover both premiums.
V-D-115hardnumerical
Q5For European options on a non-dividend-paying share, use C + PV(K) = P + S. The share is ₹100, a put with the chosen strike and expiry costs ₹4, and the present value of that strike is ₹96. What call value satisfies the supplied parity relation? Assumptions: Use European options, the same strike and expiry, no dividends, and the parity relation given in the stem.
Option A. ₹0
Why it is wrong: This subtracts the put instead of adding it in the rearranged relation.
Option B. ₹8 — Correct answer
Option C. ₹4
Why it is wrong: This ignores the difference between spot and the present value of strike.
Option D. ₹12
Why it is wrong: This counts the put twice after calculating the spot–strike-present-value difference.
Answer: B. The parity call value is ₹4 + ₹100 − ₹96 = ₹8. Matching strike, expiry and exercise style are essential to the stated relation. Remember: Put-call parity compares contracts with consistent terms and cash-flow dates.
Hint, shown before you answer in practice mode: Rearrange to C = P + S − PV(K).
V-D-116hardnumerical
Q6An investor buys a European call and sells a European put with the same strike K, underlying quantity and expiry. Before deducting the initial net premium, what is the combined payoff per unit at expiry Sₜ? Assumptions: Both European options share the same strike, underlying, quantity and expiry. The question asks payoff before initial net premium.
Option A. Zero at every expiry price.
Why it is wrong: The call and short put do not cancel. They create a linear exposure.
Option B. K − Sₜ, the payoff of a short forward.
Why it is wrong: This would correspond to reversing the option positions.
Option C. The absolute value of Sₜ − K, the payoff of a long straddle.
Why it is wrong: A straddle buys both options. This position sells the put.
Option D. Sₜ − K, the payoff of a long forward struck at K. — Correct answer
Answer: D. Above K, the call pays Sₜ − K and the put expires with zero value. Below K, the short put pays −(K − Sₜ), again equal to Sₜ − K. Initial option cash flows must be included separately when calculating total profit. Remember: Identical terminal payoffs do not justify ignoring initial cash flows.
Hint, shown before you answer in practice mode: Check separately the outcomes above and below the common strike.
V-D-117mediumapplication
Q7A desk holds 10 long call contracts, each covering a hypothetical 100 shares. Each call has delta +0.60 per underlying share. Assuming a share’s delta is +1, which stock position makes the initial combined delta approximately zero? Assumptions: The contract multiplier is hypothetical. Use the given initial deltas and ignore costs.
Option A. Buy 600 shares.
Why it is wrong: A share purchase adds positive delta rather than offsets it.
Option B. Short 60 shares.
Why it is wrong: This omits a factor of ten in contract quantity.
Option C. Short 600 shares. — Correct answer
Option D. Short 1,000 shares.
Why it is wrong: This treats the options as having delta one rather than 0.60.
Answer: C. The calls have total delta 10 × 100 × 0.60 = +600 shares. Shorting 600 shares adds −600 delta. The hedge may need rebalancing as option delta changes. Remember: A delta hedge is a local sensitivity hedge, not permanent elimination of all option risks.
Hint, shown before you answer in practice mode: Convert the option position into equivalent shares of delta exposure.
V-D-118hardnumerical
Q8An analyst defines an open-interest put-call ratio as total put open interest divided by total call open interest. Put open interest is 1,80,000 contracts and call open interest is 1,20,000 contracts. Which statement is correct? Assumptions: Use open interest, not traded volume, and the put-over-call definition supplied.
Option A. The ratio is 3.00 because each contract has a buyer and seller.
Why it is wrong: Both series use the same open-interest convention. Double-counting only the numerator is incorrect.
Option B. The ratio is 0.67 and guarantees that the price will fall next session.
Why it is wrong: This reverses the ratio and adds an unsupported certainty.
Option C. The ratio is 1.50. This alone does not guarantee the next price direction. — Correct answer
Option D. The ratio is 1.50 and guarantees that the price will rise next session.
Why it is wrong: The ratio is correct, but the directional guarantee is not justified.
Answer: C. The ratio is 1,80,000 ÷ 1,20,000 = 1.50. Open interest reflects outstanding positions whose motives may differ, so this statistic alone cannot establish a certain future price move. Remember: Market-positioning indicators need context and do not provide guarantees.
Hint, shown before you answer in practice mode: Calculate the defined ratio, then separate measurement from prediction.
V-D-119mediumnumerical
Q9A hypothetical futures contract starts with open interest of 300 contracts. During a session: 100 trades pair a new long with a new short. 40 trades pair an existing long closing with an existing short closing. And 60 trades pair one opening side with one closing side. Each trade is for one contract. Count a matched contract once. What are ending open interest and session volume? Assumptions: Each matched trade is one contract and is counted once. The opening/closing classifications are given.
Option A. Open interest 420 contracts, volume 200 contracts.
Why it is wrong: This incorrectly adds the 60 transfers between an opening and a closing participant to open interest.
Option B. Open interest 500 contracts, volume 200 contracts.
Why it is wrong: This treats every traded contract as a new outstanding contract.
Option C. Open interest 360 contracts, volume 400 contracts.
Why it is wrong: This double-counts both buyer and seller in volume instead of counting each matched contract once.
Option D. Open interest 360 contracts, volume 200 contracts. — Correct answer
Answer: D. Ending open interest is 300 + 100 − 40 + 0 = 360 contracts. Volume counts all matched trades, 100 + 40 + 60 = 200 contracts, regardless of whether they create, transfer or close positions. Remember: Open interest is an outstanding stock of contracts. Volume is trading activity over a period.
Hint, shown before you answer in practice mode: Both opening adds open interest. Both closing reduces it. An opening–closing transfer leaves it unchanged.
V-D-120hardnumerical
Strategies Using Equity Futures and Equity Options: common questions
How many practice questions are there on Strategies Using Equity Futures and Equity Options?
9 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 Strategies Using Equity Futures and Equity Options?
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 Strategies Using Equity Futures and Equity Options?
NISM's published syllabus outline gives it 9 of the paper's 150 marks, or 6% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: July 2026 Annexure I, Chapter 17: Strategies Using Equity Futures and Equity Options
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.
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