NISM Series V‑D: Mutual Fund – Specialised Investment Fund Distributors Certification Examination is designed for distributors who want to handle both traditional mutual funds and SIF in a unified certification route.

Unlike older exams that kept mutual funds and derivatives in separate silos, V‑D deliberately tests your ability to understand and apply derivative strategies in a fund context.

That is why a NISM V‑D mock test cannot be limited to basic mutual fund questions. It must include a strong component of derivatives MCQs touching:

• Futures and options mechanics
• Margining and exposure management
• Strategy behaviour (bullish, bearish, spreads, hedges)
• Option Greeks and their impact on risk

The following section is a compact MCQ bank aligned to that derivatives component.How Derivatives Fit Into NISM V-D and SIF Distribution

Specialised Investment Funds commonly use:

• Long–short equity strategies
• Derivatives overlays on mutual fund portfolios
• Tactical hedging in volatile markets

For a distributor appearing for NISM V‑D, this means you are not only learning “what is a mutual fund” but also “how derivative positions inside a SIF behave, generate returns and create risk”.A good NISM V‑D mock test therefore treats derivatives as examinable in their own right, not just as background theory. Solving MCQs built around real margin, payoff and strategy questions is the most efficient way to build exam‑ready confidence.

NISM V-D Derivatives Concepts MCQ Bank (24 Questions)

Use this section exactly like a NISM V‑D derivatives mock test.

Practice it once in exam conditions (timed), then review explanations to fill conceptual gaps.

Note: Currency derivatives have been skipped in line with a narrowed equity derivatives and strategy focus. The emphasis is on margins, futures, options and Greeks.

Q1. Which of the following statements about initial margin is correct?

• Initial margin is always equal to the mark‑to‑market margin
• Initial margin is fixed depending on price volatility. The higher the volatility, the higher the initial margin

Correct Answer: 2

Explanation: Initial margin is set upfront based on volatility and exposure. Mark‑to‑market margin is the daily settlement of profit and loss as prices move.

Q2. In exchange‑traded derivatives, who must pay margins specified by the clearing corporation?

• An individual trader
• Institutional investors
• Financial institutions
• All of the above

Correct Answer: 4

Explanation: Margin rules apply to all participants with positions in the derivatives segment, regardless of their category.

Q3. A penalty or suspension of a stockbroker from the derivatives segment can occur if:

• The broker manipulates or rigs prices
• The broker fails to follow the code of conduct
• The broker does not resolve investor complaints
• All of the above

Correct Answer: 4

Explanation: Market manipulation, conduct violations and unresolved investor grievances are all grounds for regulatory action.

Q4. The mark‑to‑market of index futures is the weekly valuation of all open positions at current prices.

• True
• False

Correct Answer: 2

Explanation: Mark‑to‑market is done daily so that gains and losses are settled each trading day, not just weekly.

Q5. A short futures position must be squared off only with the same counterparty that originally bought the contract.

• True
• False

Correct Answer: 2

Explanation: Futures trade on anonymous exchanges. You can square off with any counterparty whose order is matched on the screen.

Q6. Which measure was introduced mainly to prevent brokers from allowing excessive intraday leverage?

• Exposure margin
• Peak margin
• Initial margin
• Mark‑to‑market margin

Correct Answer: 2

Explanation: Peak margin requires brokers to consider intraday margin snapshots, limiting excessive leverage during the trading day.

Q7. A stock index like Nifty is:

• A basket of stocks
• A benchmark equity index
• A popular underlying for derivatives trading
• All of the above

Correct

Answer: 4

Explanation: Nifty is constructed from a basket of stocks, acts as a benchmark, and is widely used as an underlying for index futures and options.

Q8. As per the J. R. Verma Committee recommendations, it is the stock exchange’s responsibility to continuously analyse and modify initial margin requirements.

• True
• False

Correct Answer: 2

Explanation: The responsibility lies with the clearing corporation, which manages margin policies and counterparty risk.

Q9. A clearing corporation guarantees settlement of trades and acts as a legal counterparty. To manage risk, it primarily collects:

• Interest
• Commission
• Margin
• Brokerage

Correct Answer: 3

Explanation: Margin is collected from members to cover potential losses and maintain systemic stability.

Q10. You sell one ICICI Ltd. futures contract at ₹560. Lot size is 1,000. You later buy it back at ₹565. What is the outcome?

• Profit of ₹1,000
• Loss of ₹10,000
• Loss of ₹5,000
• Profit of ₹5,000

Correct Answer: 3

Explanation: Price moved ₹5 against your short. Loss = ₹5 × 1,000 = ₹5,000.

Q11. Clearing Member A maintains more liquid assets with the clearing corporation than Clearing Member B. Which statement is true?

• A can take higher futures exposure than B
• B can take higher futures exposure than A
• Both have the same exposure limit
• Liquid assets are not required for derivatives exposure

Correct Answer: 1

Explanation: Higher margin and liquid assets allow a clearing member to carry larger open positions.

Q12. Client C1 buys 800 contracts and client C2 sells 900 contracts in the same futures series through the same member. What is the member’s open position with the clearing corporation?

• 800
• 1700
• 900
• 100

Correct Answer: 2

Explanation: Open position is computed on a gross basis: 800 long plus 900 short = 1,700 contracts.

Q13. Trader A sells 20 August futures contracts at ₹4,500. Trader B sells 17 September futures at ₹4,550. Lot size is 50 and initial margin is 6%. Total initial margin?

• ₹2,70,000
• ₹5,02,050
• ₹2,32,050
• ₹4,10,000

Correct Answer: 2

Explanation:

A: 20 × 4,500 × 50 × 6% = ₹2,70,000
B: 17 × 4,550 × 50 × 6% = ₹2,32,050
Total: ₹5,02,050.

Q14. Buying a lower‑strike call and selling a higher‑strike call on the same stock and expiry is called:

• Bullish spread
• Bearish spread
• Butterfly spread
• Calendar spread

Correct Answer: 1

Explanation: A bull call spread profits from a moderate rise in the underlying, with limited risk and limited reward.

Q15. In which option type is the strike price more favourable than the current market price, making it profitable to exercise?

• Out‑of‑the‑money
• In‑the‑money
• At‑the‑money
• Higher‑the‑money

Correct Answer: 2

Explanation: In‑the‑money options have positive intrinsic value, so exercising them yields an economic gain.

Q16. Three call options on the same stock with the same strike but different expiries (January, February, March) are quoted. Which typically has the lowest premium?

• January
• February
• March
• All are equal

Correct Answer: 1

Explanation: The nearest expiry option has the least time value and usually the lowest premium.

Q17. Which best describes Gamma (γ) in options?

• A. Change in premium due to time decay
• B. Change in Delta when the underlying price changes
• C. Change in option price due to interest rate changes
• D. Sensitivity of option price to volatility

Correct Answer: B

Explanation: Gamma measures how much Delta changes for a small movement in the underlying asset price.

Q18. An option has Delta 0.5. If the underlying share price rises by ₹2, the option price will increase by approximately:

• ₹1
• ₹2
• ₹50
• ₹20

Correct Answer: 1

Explanation: Approximate change = Delta × price move = 0.5 × 2 = ₹1.

Q19. You sell a put with strike ₹245 and receive premium ₹49. Theoretical maximum loss is:

• ₹196
• ₹206
• ₹0
• ₹49

Correct Answer: 1

Explanation: If the underlying falls to zero, loss = strike − premium = 245 − 49 = ₹196 per share.

Q20. Spot price is ₹750. Forward maturity is 6 months, interest rate is 12% per year. Approximate fair forward price?

• ₹772.50
• ₹795
• ₹840
• ₹940.80

Correct Answer: 2

Explanation: Forward price = 750 + 750 × 12% × 6/12 = 750 + 45 = ₹795.

Q21. A bearish view with zero initial cash outflow is expressed by:

• Buying a call
• Selling a call
• Selling any option
• Buying a put

Correct Answer: 2

Explanation: Selling a call (naked) brings in premium and reflects a bearish or neutral expectation.

Q22. You short 1 June XYZ futures contract (lot 50) at ₹3,400 and later close with a profit of ₹10,000. The closing trade must be:

• Sell at ₹3,600
• Buy at ₹3,600
• Buy at ₹3,200
• Sell at ₹3,200

Correct Answer: 3

Explanation: Profit per share = 10,000 ÷ 50 = ₹200. Short at 3,400, close at 3,200.

Q23. Consider:

Statement I (Rho): Rho measures the sensitivity of the option price to volatility.

Statement II (Vega): Vega measures the sensitivity of an option's price to interest rate changes.

Which option is correct?

• A. Both are true
• B. I true, II false
• C. I false, II true
• D. Both are false

Correct Answer: D

Explanation: Rho measures sensitivity to interest rates; Vega measures sensitivity to volatility. Both statements as given are wrong.

Q24. Buying a share in one market and simultaneously selling it in another to benefit from a price difference is called:

• Arbitrage
• Hedging
• Speculation
• Mortgage

Correct Answer: 1

Explanation: Arbitrage involves exploiting price differences for the same asset across markets to lock in a risk‑free profit.