Sample Questions

NISM-Series-16: Commodity Derivatives Mock Tests — 5 random MCQs with answers & explanations

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These 5 questions are randomly selected (standard MCQs only, not case-based).

Q1 A commodity "Put" option is considered "Out of the Money" (OTM) when:

A. The spot price is higher than the strike price Correct Answer
B. The spot price is lower than the strike price
C. The spot price equals the strike price
D. The spot price equals the OTC price

Explanation:

A put option gives the right to sell. If the current market (spot) price is already higher than your sell price (strike), the option has no immediate profit value.

Marks: 1

Q2 For Option on Futures and Option on Goods having the same terms and conditions, which statement is true? (NISM workbook)

A. Option on Goods may be less volatile than Options on Futures and hence, Option on goods may be costlier
B. Option on Goods may be less volatile than Options on Futures and hence, Option on goods may be cheaper
C. Option on Goods may be more volatile than Options on Futures and hence, Option on goods may be costlier Correct Answer
D. Option on Goods may be more volatile than Options on Futures and hence, Options on goods may be cheaper

Explanation:

Spot markets, underlying Options on Goods, are unregulated and lack DPLs, leading to higher volatility and potentially higher option premiums compared to Options on Futures.

Marks: 1

Q3 A trader buys September Gold futures at ₹52,000 and sells November Gold futures at ₹52,200 to profit from a price gap. This trade is called:

A. Reverse Cash and Carry Arbitrage
B. Cash and Carry Arbitrage
C. Buying a Spread Correct Answer
D. Selling a Spread

Explanation:

Buying the near-month and selling the far-month simultaneously is "buying a spread." It is a strategy used to profit when the price difference between two months is expected to change.

Marks: 1

Q4 Which of the following is included in the definition of 'Securities' under SCRA Act?

A. Debentures and bonds
B. Government securities
C. Financial Derivatives
D. All of the above Correct Answer

Explanation:

SCRA defines securities broadly to include bonds, government securities, and derivatives.

Marks: 1

Q5 If a farmer is worried that wheat prices will fall before harvest time, what should they do in the futures market?

A. Buy (Long) wheat futures.
B. Sell (Short) wheat futures. Correct Answer
C. Buy a Call option.
D. Wait and do nothing.

Explanation:

By selling futures now, the farmer "locks in" a high selling price. If prices fall later, their gain in the futures market covers their loss in the fields.

Marks: 1

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