Series VIII
Equity Derivatives
50 questionsPass mark 60%Negative marking 25% / wrong answer
NISM Series VIII practice questions
150 questions. Each answer is explained.
Question 1 of 10Practice · Series VIII — Equity Derivatives
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
- Market X-RayMarket X-Ray
- F&O lot sizesReference
- Market X-RayMarket X-Ray
- What an Option Premium Is Made OfLesson
- Build a strategyMarket X-Ray
- Options breakeven calculatorCalculator
- Market X-RayMarket X-Ray
- Market, Limit and Stop OrdersLesson
- Market X-RayMarket X-Ray
- T+1 settlement date calculatorCalculator
- F&O turnover and audit calculatorCalculator
- What a Chart Can and Cannot Tell YouLesson
- DeltaLesson
- Open Interest vs VolumeLesson
- Expiry WeekLesson
Practise one unit at a time
- Basics of Derivatives10 questions · 8 of 100 marks in the exam (8%)
- Understanding the Index6 questions · 2 of 100 marks in the exam (2%)
- Forwards and Futures9 questions · 25 of 100 marks in the exam (25%)
- Application of Futures13 questions · 25 of 100 marks in the exam (25%)
- Introduction to Options21 questions · 28 of 100 marks in the exam (28%)
- Application of Options33 questions · 28 of 100 marks in the exam (28%)
- Trading Mechanism11 questions · 4 of 100 marks in the exam (4%)
- Clearing, Settlement and Risk Management16 questions · 13 of 100 marks in the exam (13%)
- Legal and Regulatory Environment17 questions · 15 of 100 marks in the exam (15%)
- Accounting and Taxation9 questions · 3 of 100 marks in the exam (3%)
- Sales Practices and Investor Protection5 questions · 2 of 100 marks in the exam (2%)
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 |
NISM Series VIII Equity Derivatives
Exam rules read on NISM's site on 3 October 2026. Test objectives in force from 1 May 2022. 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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.
5 sample questions with answers
The other 145 are on the unit pages above, written out the same way.
Q1Which of the following is NOT an economic function normally attributed to an organised derivatives market?
Option A. Ensuring that every participant earns a profit — Correct answer
Option B. Contributing to price discovery
Why it is wrong: Incorrect as a choice because derivatives can contribute to price discovery.
Option C. Providing an organised venue for risk-taking and hedging
Why it is wrong: Incorrect as a choice because organised derivatives markets facilitate hedging and risk-taking under trading and risk-management rules.
Option D. Facilitating transfer of price risk
Why it is wrong: Incorrect as a choice because risk transfer is an important derivatives-market function.
Answer: A. Derivatives markets can help transfer risk, improve price discovery and move trading into an organised, risk-managed framework. They do not guarantee profits. Derivatives can produce substantial losses. Remember: Derivatives facilitate risk management and price discovery. They do not remove market risk or guarantee outcomes.
Hint, shown before you answer in practice mode: Common mistake: Equating a regulated market with a guaranteed profitable market.
VIII-006mediumconceptual
Q2As an equity futures contract approaches expiry, what should happen to a persistent difference between its futures price and the corresponding spot price, other things being equal?
Option A. It should tend to converge toward zero by maturity — Correct answer
Option B. It should tend to widen indefinitely
Why it is wrong: A widening gap close to expiry would generally create stronger relative-value pressure, not a normal terminal condition.
Option C. It must remain fixed from the day the contract was listed
Why it is wrong: The basis changes with market prices and time to expiry.
Option D. It becomes unrelated to arbitrage because expiry is near
Why it is wrong: Arbitrage relationships are central to why convergence occurs.
Answer: A. The spot-futures price difference normally narrows as expiry approaches because the remaining cost of carry diminishes and arbitrage pressures discourage a material price gap at maturity. This is the convergence principle. Remember: Time to expiry shrinks toward zero, so the sustainable spot-futures gap also tends toward zero.
Hint, shown before you answer in practice mode: Common mistake: Thinking a futures premium or discount present today must survive unchanged until expiry.
VIII-016easyconceptual
Q3Holding spot, strike, interest rate, dividends and time to expiry constant, what is the usual effect of an increase in expected volatility on the value of both a plain call and a plain put?
Option A. Both generally increase — Correct answer
Option B. Both generally decrease
Why it is wrong: Lower, not higher, volatility would generally reduce option value all else equal.
Option C. Call increases but put must decrease
Why it is wrong: Both option types generally benefit from greater uncertainty.
Option D. Neither can change
Why it is wrong: Volatility is a core option-pricing input.
Answer: A. Greater volatility increases the range of possible future underlying prices. Because an option buyer has asymmetric payoff—downside is limited to premium while favourable moves can increase payoff—higher expected volatility generally raises the value of both calls and puts, other factors held constant. Remember: Vega is typically positive for long vanilla calls and puts: more expected volatility generally means more option value.
Hint, shown before you answer in practice mode: Common mistake: Thinking higher volatility benefits calls but hurts puts because their directional payoffs differ.
VIII-113mediumconceptual
Q4What is the main objective when an exchange adjusts derivative contract terms for a corporate action such as a stock split or bonus issue?
Option A. To keep the value of open positions unchanged by the corporate action — Correct answer
Option B. To guarantee a profit to every option holder affected by the action
Why it is wrong: The adjustment does not guarantee profit.
Option C. To change every open long position into a short position on the ex-date
Why it is wrong: Directional positions are not automatically reversed.
Option D. To eliminate all margin requirements on the adjusted contracts
Why it is wrong: Margin requirements continue under the applicable framework.
Answer: A. Corporate-action adjustments are designed so that, as far as practicable, the economic value of open derivative positions is preserved across the ex-date. Depending on the action, strike prices, market lots/positions or other contract terms may be adjusted. Remember: Corporate-action adjustments are intended to remove mechanical windfalls/losses, not market risk.
Hint, shown before you answer in practice mode: Common mistake: Thinking a split or bonus itself should create derivative profit because the quoted share price changes.
VIII-137mediumconceptual
Q5Before enabling a client for equity-derivatives trading, which combination is most consistent with the investor-protection framework?
Option A. Enable derivatives first and complete KYC later, only if the client makes a loss
Why it is wrong: KYC cannot be postponed until after losses occur.
Option B. Complete KYC, give the risk disclosures and record the client’s financial details — Correct answer
Option C. Skip the risk disclosures if the client has traded cash equities for years
Why it is wrong: Prior cash-market experience does not remove derivative risk-disclosure duties.
Option D. Accept an anonymous account as long as enough margin is deposited upfront
Why it is wrong: Anonymous dealing is inconsistent with KYC/AML requirements.
Answer: B. Derivatives access is not based only on the ability to post margin. Intermediaries must comply with client-registration/KYC requirements, provide mandated risk disclosure, and maintain the required information for clients opting for derivatives, including applicable financial information under the framework. Remember: Client onboarding for derivatives combines identity/KYC, risk disclosure and appropriate client information—not merely margin collection.
Hint, shown before you answer in practice mode: Common mistake: Assuming a signed trading form alone is enough for derivatives activation.
VIII-085mediumregulatory
NISM Series VIII practice: common questions
Are these the real NISM Series VIII exam questions?
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 many practice questions are there for NISM Series VIII?
150 at the moment, across 11 practice topics, with one page per unit. It is a practice set, not a copy of the paper: the real NISM-Series-VIII: Equity Derivatives Certification Examination has 100 questions.
Where are all the questions and answers?
On the 11 practice topics listed above. There are 5 in full. Each unit's page has the rest, with all four options, the correct answer and why each other option is wrong.
Does negative marking apply to NISM Series VIII?
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.
How do I book the NISM Series VIII exam?
You register and pay on NISM's own website, nism.ac.in. The steps and the fee change from time to time, so read them there on the day you book.
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.
See the exam these questions follow
The Equity Derivatives exam page shows the question count, the time, the pass mark and the marking rule.
Open the NISM Series VIII exam page