NISM Series VIII Formulas, Worked Out: Six Practice Examples From One Stock
Futures price, basis, break-evens, time value, put-call parity and P&L, all on one set of numbers.
NISM Series VIII (Equity Derivatives) has plenty of numerical questions: futures prices, option payoffs, break-evens, hedge sizes. Reading a formula list is easy. Using it in about 72 seconds a question is not. (The exam is 100 questions in 2 hours, per NISM’s official page.)
So this post does something different. It takes one made-up stock and runs six formulas on it, step by step. Do each one yourself before you read the answer.
Key takeaways
- Futures fair price = spot x (1 + r x t) minus dividends.
- Calls break even at strike plus premium, puts at strike minus premium.
- On expiry day an option is worth only its intrinsic value.
- Check the sign on every short position.
Key terms
Basis is the futures price minus the spot price.
Intrinsic value is how much an option is in the money, and never less than zero.
Beta is how much a portfolio tends to move when the index moves by 1%.
The setup
- Spot price of stock XYZ: ₹2,000
- Interest rate: 8% a year
- Time to expiry: 3 months (t = 0.25 years)
- Lot size: 500 shares (made up for this example; real lot sizes are set by the exchange and change)
1. Futures fair price (cost of carry)
Formula: F = S × (1 + r × t) − Dividends
Work it: 2,000 × (1 + 0.08 × 0.25) = 2,000 × 1.02 = ₹2,040
If XYZ pays a ₹10 dividend before expiry: 2,040 − 10 = ₹2,030.
Why the futures price is usually above spot: the buyer of a future does not pay for the shares today, so the price includes the interest they would otherwise have paid. Dividends, such as the ₹10 above, reduce it because the futures buyer does not receive them.
2. Basis
Formula: Basis = Futures price − Spot price
Work it: 2,040 − 2,000 = ₹40
A positive basis means futures trade at a premium to spot.
3. Break-even for a long call
Question: you buy a 2,000 strike call for a premium of ₹50. Where do you break even at expiry? What is your profit per share if XYZ ends at ₹2,080?
Formula: Break-even = Strike + Premium
Work it: 2,000 + 50 = ₹2,050
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At ₹2,080, the call is worth its intrinsic value: max(2,080 − 2,000, 0) = 80. Profit per share = 80 − 50 = ₹30.
4. Break-even for a long put
Question: you buy a 2,000 strike put for ₹40. Break-even? Profit per share if XYZ ends at ₹1,930?
Formula: Break-even = Strike − Premium
Work it: 2,000 − 40 = ₹1,960
At ₹1,930, the put is worth max(2,000 − 1,930, 0) = 70. Profit per share = 70 − 40 = ₹30.
5. Time value
Question: a 1,950 strike call trades at ₹70 while spot is ₹2,000. How much of that premium is time value?
Formula: Time value = Premium − Intrinsic value
Work it: intrinsic = max(2,000 − 1,950, 0) = 50. Time value = 70 − 50 = ₹20.
Only the time value decays. On expiry day, an option is worth exactly its intrinsic value, so if a question asks what the option is worth at expiry, ignore the premium and compute intrinsic value.
6. Put-call parity
Question: a 2,000 strike call is ₹80. What should the 2,000 strike put with the same expiry be worth?
Formula: C + K ÷ (1 + r)ᵗ = P + S
Work it:
- K ÷ (1.08) to the power 0.25 = 2,000 ÷ 1.0194 ≈ 1,961.9
- P = C + 1,961.9 − S = 80 + 1,961.9 − 2,000 ≈ ₹41.9
If the market put price is far from this, the parity relation is broken and an arbitrage may exist. Exam questions often give three of the four values and ask for the fourth. For example, they may give C, P and S and ask for the strike.
Bonus: futures P&L
Question: you buy 1 lot of XYZ futures at ₹2,040 and close it at ₹2,100. Profit?
Formula: (Exit − Entry) × Lot size × Contracts
Work it: (2,100 − 2,040) × 500 × 1 = ₹30,000
For a short position, reverse the sign: the same move would be a ₹30,000 loss.
The three mistakes that cost the most marks
- Sign errors on short positions. Write “long” or “short” next to every number before you compute.
- Using the premium on expiry day. At expiry, value = intrinsic value. Nothing else.
- Mixing up call and put break-evens. Calls add the premium, puts subtract it.
PrepClever keeps the full NISM Series VIII formula sheet with all ten formulas in one table and a beta-hedge example using Nifty futures, which is worth keeping open while you practise.
Who sets the rules
NISM is a public trust established in 2006 by the Securities and Exchange Board of India (SEBI), the market regulator. It runs the mandatory certification exams for people who work at market intermediaries, under the SEBI (Certification of Associated Persons in Securities Markets) Regulations, 2007. When a certificate expires, NISM’s rule is that you re-validate it before expiry, either by passing the exam again or through a CPE programme.
All stock names, prices and lot sizes in this post are made up for practice.
About the author: Sarvind Rankawat is the founder of PrepClever (prepclever.in), which runs free NISM practice tests and a Hindi NISM channel on YouTube. Exam facts here were fact-checked against nism.ac.in in November 2026. To report an error, contact PrepClever through the site.
