The fastest way to know if you actually understand equity derivatives isn't re-reading the textbook, it's attempting real mock test questions and seeing where you stumble. Below are 15 genuine equity derivatives practice questions covering margins, hedging, options, and futures pricing, each with the correct answer and a plain-language explanation.

Table of contents

• Why mock tests matter more than re-reading theory
• Question 1: KYC and client due diligence
• Question 2: Put options and quantity rights
• Question 3: Forward price calculation
• Question 4: Futures gain and loss calculation
• Question 5: Impact cost and liquidity
• Question 6: Hedging and its actual purpose
• Question 7: Clearing corporations and settlement
• Question 8: Cost of carry model
• Question 9: Squaring off a futures position
• Question 10: Initial margin and volatility
• Question 11: Interest rate and contract maturity
• Question 12: Exchange-traded options
• Question 13: Intrinsic value of options
• Question 14: Stockbroker penalties under SEBI rules
• Question 15: Clearing corporation features
• What these 15 questions reveal about your prep
• How to use this mock test properly
• Closing thoughts
• Frequently asked questions

Why mock tests matter more than re-reading theory

Reading a chapter on futures and options feels productive, but it rarely tells you what you'll actually struggle with under exam pressure.

Mock test questions expose the specific gaps that theory reading tends to hide, especially in numerical problems.

The equity derivatives section of NISM V-D leans heavily on applying concepts to scenarios, not just recalling definitions.

Working through real questions with explanations builds the kind of pattern recognition that pure reading never quite gets you to.

Question 1: KYC and client due diligence

Question: When establishing a relationship with a new client, the trading member takes reasonable steps to assess the background, genuineness, beneficial identity, and financial soundness of such a person and his investment/trading objectives.

Answer: True

Explanation: This due diligence step reduces the probability and chances of dealing with defaulting members. This obligation ties directly into SEBI's broader KYC framework for market intermediaries, outlined in SEBI's Know Your Client requirements.

This is a compliance-heavy question, and it's a reminder that Module 2 isn't only about pricing formulas, distributor conduct and client onboarding show up too.

Question 2: Put options and quantity rights

Question: A put option gives the buyer a right to sell any quantity of the underlying to the writer of the option.

Answer: False

Explanation: A put option gives the buyer the right to sell a specified quantity of the underlying to the writer, not "any quantity."

That single word, "specified" instead of "any," is exactly the kind of detail negative marking punishes. Contracts are standardized, and lot sizes are fixed in advance.

Question 3: Forward price calculation

Question: Which of the following is closest to the forward price of a share, if Cash Price = Rs.750, Forward Contract Maturity = 6 months from date, Market Interest rate = 12%?

Answer: Rs. 795

Explanation:

Step	Calculation
Formula	Forward price = Cash price + (Cash price × interest × period)
Interest component	750 × 6/12 × 12% = 45
Forward price	750 + 45 = 795

This cost-of-carry logic shows up repeatedly in Forwards and Futures, the highest-weighted chapter in the whole syllabus.

Question 4: Futures gain and loss calculation

Question: If you have sold a XYZ futures contract (contract multiplier 50) at 3100 and bought it back at 3300, what is your gain or loss?

Answer: A loss of Rs. 10,000

Explanation:

Step	Calculation
Sold at	3,100 (expecting prices to fall)
Bought back at	3,300 (price rose instead)
Loss per unit	200
Total loss	200 × 50 (contract size) = Rs. 10,000

Selling first means you profit only if the price falls. Here it rose, so the loss follows directly from the direction mismatch.

Question 5: Impact cost and liquidity

Question: High impact cost is beneficial for a seller.

Answer: False

Explanation: High impact cost is neither beneficial for a seller nor a buyer. High liquidity in a stock or index keeps impact cost low, and higher liquidity always means lower impact cost.

Impact cost questions test whether you understand liquidity's role in derivatives trading, not just definitions in isolation.

Question 6: Hedging and its actual purpose

Question: Which of the following statement is correct with respect to hedging? (a) It maximises business profits (b) It produces a more precise outcome.

Answer: Option b

Explanation: Hedging is done with the intention of reducing uncertainty associated with a trade. It's a technique to reduce losses, but it also limits profit, it never maximizes profit.

This is one of the most commonly misunderstood ideas in the entire module. Hedging protects against downside, it doesn't chase upside.

Question 7: Clearing corporations and settlement

Question: A clearing corporation on a derivatives exchange becomes a legal counterparty to all trades and is responsible for guaranteeing settlement for all open positions.

Answer: True

Explanation: Clearing corporations ensure smooth settlement and reduce counterparty risk. This function, becoming the legal counterparty to every trade, is also called novation, a mechanism detailed further in NISM's official study material portal.

Question 8: Cost of carry model

Question: The cost of carry model states that ____.

Answer: Price of Futures = Spot + Cost of Carry

Explanation: Cost of carry refers to expenses incurred to hold the stock, such as financing costs, storage costs, and dividends, or any other costs tied to maintaining a position.

This ties directly back to Question 3's forward pricing calculation, both rest on the same underlying formula.

Struggling to keep these formulas straight? A structured prep program that walks through every calculation step by step, with practice built around the exact exam weightage, makes this section far less overwhelming.

Question 9: Squaring off a futures position

Question: A short position in the future market can be squared off by taking a long position with the same counterparty from whom the contract was initially sold.

Answer: False

Explanation: Futures trade on a screen-based derivative market where buyer and seller identities aren't known to each other. A trade can be squared off with any buyer or seller whose quotes are available on the screen, not necessarily the same counterparty.

Question 10: Initial margin and volatility

Question: Which of the following statement is correct? (1) Initial margin is always equal to the mark-to-market margin (2) Initial margin is fixed depending on price volatility; higher volatility means a higher initial margin.

Answer: Option 2

Explanation: Initial margin depends on the exposure taken. Mark-to-market margin, on the other hand, is calculated daily based on the underlying asset's closing value. The two are not the same thing.

Question 11: Interest rate and contract maturity

Question: Longer the maturity of a contract, the higher the interest rate/cost of carry.

Answer: True

Explanation: This reflects the upward-sloping yield curve. Lenders typically demand higher compensation for longer time horizons, since uncertainty about future economic conditions and inflation grows the further out you look.

Question 12: Exchange-traded options

Question: Exchange-traded options are ____.

Answer: Standardised options

Explanation: Exchange-traded options have predetermined contract specifications, the underlying asset, expiration date, strike price, and contract size are all fixed. This standardization is what allows easy trading and liquidity, since multiple participants can trade the same contract.

Question 13: Intrinsic value of options

Question: Which of the following statement is correct? (1) The intrinsic value is zero for OTM options (2) The intrinsic value is positive for ATM options.

Answer: Statement 1

Explanation: Intrinsic value refers to the amount by which an option is in the money. An out-of-the-money (OTM) option, by definition, has no such value, so its intrinsic value is zero.

Question 14: Stockbroker penalties under SEBI rules

Question: A penalty or suspension of registration of a stockbroker from a derivatives exchange/segment under the SEBI (Stock Broker) Regulations, 1992 can take place if ____.

Answer: In any of the above situations

Explanation: Failing to pay fees, violating registration conditions, or being suspended by the stock exchange can each independently trigger a penalty or suspension. It doesn't take all three together.

Question 15: Clearing corporation features

Question: Which of the following statements is correct? (1) Clearing corporations are responsible for clearing and settling all trades executed on the F&O segment (2) Clearing corporations act as a legal counterparty to all trades and guarantee financial settlement (3) The clearing corporation's features comprise clearing, settlement, and risk management.

Answer: Options 1, 2, and 3

Explanation: All three statements describe genuine features of a clearing corporation, none of them are mutually exclusive or incorrect on their own.

What these 15 questions reveal about your prep

Looking at these questions as a group rather than one at a time shows a pattern worth paying attention to.

Topic area	Questions	What it tests
Futures pricing and calculations	3, 4, 8, 11	Cost of carry formula, numerical accuracy
Options mechanics	2, 12, 13	Definitions, standardization, intrinsic value
Risk and margin concepts	5, 6, 10	Hedging purpose, impact cost, margin logic
Market infrastructure	1, 7, 9, 14, 15	Clearing corporations, compliance, settlement rules

Notice that only 4 of the 15 questions are pure calculations. The rest test conceptual precision, exactly why memorizing formulas without understanding what they represent tends to backfire on this exam.

If these questions felt harder than expected, it usually means the underlying concepts weren't fully built before jumping into practice. The NISM V-D course covers each of these topics, cost of carry, hedging, margin rules, in the same sequence the exam tests them, so mock test questions like these stop feeling random.

How to use this mock test properly

Running through 15 questions once isn't the same as actually preparing with them. A few habits make the difference.

• Attempt each question cold before reading the explanation, guessing and checking teaches you nothing about your actual weak spots.
• Re-do any question you got wrong after a day's gap, if you still stumble, that topic needs a proper revisit, not just a re-read.
• Pay attention to single-word traps like Question 2's "any quantity" versus "specified quantity," these show up constantly in the real exam.
• Track which category from the table above you're weakest in, and spend your remaining study time there instead of spreading it evenly.

Closing thoughts

Fifteen questions won't cover everything Module 2 tests, but they reveal the exact texture of what you're up against, close reading of wording, comfort with the cost-of-carry formula, and a clear grasp of why hedging limits profit rather than maximizing it.

If you're serious about clearing this exam on your first attempt, working through a full mock test bank under timed conditions, not just 15 sample questions, is what actually separates a confident attempt from a shaky one.

Working through mock questions like these repeatedly, rather than relying on theory alone, is what actually builds exam-day confidence.

Frequently asked questions

1. Are these mock test questions similar to the actual NISM V-D exam format?

Yes, they follow the same single-correct-option and true/false formats used in the actual computer-based exam, including scenario-based numerical questions.

2. Why do numerical questions like forward pricing keep repeating in equity derivatives mock tests?

Because Forwards and Futures carries 15 marks, the highest weight of any chapter in the syllabus, so cost-of-carry calculations are tested repeatedly in different forms.

3. What's the most common mistake candidates make on true/false derivatives questions?

Missing small wording differences, like "any quantity" versus "specified quantity," which completely changes whether a statement is true or false.

4. Does hedging actually increase profits?

No, hedging reduces uncertainty and limits losses, but it also caps potential profit. It's a common misconception that hedging is meant to maximize gains.

5. What is the difference between initial margin and mark-to-market margin?

Initial margin depends on the exposure taken and price volatility, while mark-to-market margin is recalculated daily based on the underlying asset's closing price.

6. How many questions in a typical equity derivatives mock test focus on calculations versus concepts?

Based on patterns like this set, roughly a quarter focus on pure calculations, while the majority test conceptual understanding and precise definitions.

7. Is prior trading experience needed to score well on this mock test?

No, these questions test conceptual clarity and attention to detail, both of which can be built through structured practice without any real trading background.