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100+ Free NCFM Options Trading Strategies Practice Questions

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Key Facts: NCFM Options Trading Strategies Exam

60 questions

The NCFM Options Trading Strategies exam has 60 multiple-choice questions

NSE Academy - Assessment Structure

120 minutes

Candidates have 2 hours to complete the online computer-based exam

NSE Academy - Assessment Structure

60% pass

The passing score for the Options Trading Strategies module is 60 out of 100 marks

NSE Academy - Assessment Structure

25% negative

Wrong answers carry a penalty of 25% of the marks assigned to the question

NSE Academy - Assessment Structure

Rs. 2,596

The examination fee is Rs. 2,596 inclusive of GST

NSE Academy - Self Study Modules

5 years

The NCFM Options Trading Strategies certificate is valid for 5 years

NSE Academy - Certification Validity

86% weight

The Option Strategies chapter constitutes 86% of the total exam weight

NSE Academy - Module Curriculum

100

Free practice questions available on OpenExamPrep

OpenExamPrep

NCFM Options Trading Strategies is an advanced NSE Academy certification testing practical application and calculations for 22 options strategies. The exam has 60 MCQs in 120 minutes, a 60% passing score, and 25% negative marking. The fee is Rs. 2,596, and the certificate is valid for 5 years. This bank provides 100 free practice questions.

Sample NCFM Options Trading Strategies Practice Questions

Try these sample questions to test your NCFM Options Trading Strategies exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1What is the premium of an option defined as in options trading?
A.The price paid by the option buyer to the option seller for acquiring the option's rights.
B.The price at which the underlying asset can be bought or sold if the option is exercised.
C.The transaction fee charged by the stock exchange for executing an option contract.
D.The security deposit required from the option writer to maintain the open short position.
Explanation: The option premium is the market price of an option contract, which the option buyer pays to the option writer (seller) to acquire the right (but not the obligation) to buy or sell the underlying asset. The strike price is the price at which the asset can be bought or sold, while exchange transaction fees and margins are operational and collateral requirements respectively.
2An investor holds a European call option. When can this option be exercised?
A.Only on the expiration date of the contract.
B.At any time on or before the expiration date.
C.Only when the underlying asset's market price is above the strike price.
D.On the specific settlement date three days after the expiration date.
Explanation: European-style options can only be exercised on the expiration date itself, unlike American-style options which can be exercised at any point up to and including the expiration date. In Indian stock markets, both index and stock options are currently traded as European-style options.
3What is the intrinsic value of a put option with a strike price of Rs. 450 when the underlying stock is trading at Rs. 420?
A.Rs. 30
B.Rs. 0
C.Rs. -30
D.Rs. 450
Explanation: The intrinsic value of a put option is calculated as the strike price minus the underlying asset price (K - S), bounded by zero. Here, the intrinsic value is Rs. 450 - Rs. 420 = Rs. 30. If the stock price were above the strike price, the intrinsic value would be zero, as intrinsic value cannot be negative.
4Based on Put-Call Parity, what is the synthetic equivalent of a long stock position?
A.Long Call and Short Put with the same strike price and expiration date.
B.Long Call and Long Put with the same strike price and expiration date.
C.Short Call and Long Put with the same strike price and expiration date.
D.Short Call and Short Put with the same strike price and expiration date.
Explanation: Put-Call Parity states that C - P = S - K * e^(-rT). Rearranging this formula, S = C - P + K * e^(-rT), which means a long stock position (S) is synthetically equivalent to buying a call (C) and selling a put (P) at the same strike and expiration. This relationship forms the basis of conversion and reversal arbitrage.
5How does an increase in the volatility of the underlying asset affect the prices of call and put options?
A.It increases the values of both call and put options.
B.It increases the call option value and decreases the put option value.
C.It decreases the values of both call and put options.
D.It has no direct effect on option pricing as volatility only impacts delta.
Explanation: Higher volatility increases the probability that the underlying asset will make large price movements in either direction. Because option buyers have limited downside (the premium paid) but significant upside potential, higher volatility makes the option more valuable. Therefore, an increase in volatility increases the premiums of both call and put options.
6Which of the following describes the option Greek 'Theta'?
A.The rate of change of the option's price with respect to the passage of time.
B.The sensitivity of the option's price to changes in the underlying asset's price.
C.The rate of change of delta with respect to changes in the underlying asset's price.
D.The sensitivity of the option's price to changes in the risk-free interest rate.
Explanation: Theta measures the rate of decay of the option's value over time, assuming all other factors remain constant (time decay). Theta is generally negative for option buyers because options lose time value as they approach expiration, and positive for option writers who benefit from this decay.
7If an option contract has a Delta of -0.40, which type of option is it most likely to be?
A.An out-of-the-money put option.
B.An in-the-money call option.
C.An at-the-money call option.
D.An in-the-money put option.
Explanation: Delta ranges from 0 to 1 for call options and -1 to 0 for put options. A negative Delta indicates a put option. An out-of-the-money (OTM) put option has a Delta between -0.50 and 0, meaning a Delta of -0.40 is consistent with an OTM put option. At-the-money puts typically have a Delta near -0.50, and in-the-money puts have Deltas between -0.50 and -1.00.
8Which of the following option pricing inputs has a negative relationship with the price of a call option?
A.Dividends expected during the life of the option.
B.The price of the underlying asset.
C.The risk-free interest rate.
D.The time remaining until expiration.
Explanation: When a company pays a dividend, the stock price drops by the dividend amount on the ex-dividend date. Since a lower stock price reduces the probability of a call option finishing in-the-money, expected dividends have a negative impact on call prices. In contrast, higher stock prices, higher interest rates, and more time to expiration increase call option premiums.
9Under what condition is the time value of an option generally at its maximum?
A.When the option is at-the-money.
B.When the option is deeply in-the-money.
C.When the option is deeply out-of-the-money.
D.On the morning of the expiration day.
Explanation: Time value represents the premium over the intrinsic value. At-the-money (ATM) options have the highest time value because there is the greatest uncertainty about whether they will expire in-the-money or out-of-the-money. Deeply in-the-money or out-of-the-money options have very little time value, and time value decays to zero on the expiration day.
10What is the key difference between how option premiums behave for stock options and index options in terms of liquidity and bid-ask spreads?
A.Index options generally have higher liquidity and narrower bid-ask spreads than individual stock options.
B.Stock options have narrower bid-ask spreads due to their lower pricing volatility.
C.Index options are less liquid because they represent a basket of stocks.
D.There is no structural difference as both are cleared through the same clearing corporation.
Explanation: In Indian markets, index options (such as Nifty 50 and Bank Nifty) exhibit much higher trading volume and liquidity than individual stock options. Consequently, index options generally trade with much narrower bid-ask spreads, making transaction costs significantly lower for traders implementing complex multi-leg strategies.

About the NCFM Options Trading Strategies Exam

The NCFM Options Trading Strategies Module is an advanced level certification administered by NSE Academy. It is designed to provide traders, investors, and finance professionals with an in-depth understanding of how to implement various options trading strategies based on different market outlooks. The syllabus is heavily weighted toward option strategies (86%), covering 22 specific strategies including spreads (Bull/Bear Call/Put spreads), covered positions (Covered Call, Covered Put), volatility trades (Straddles, Strangles), defensive hedges (Collar, Protective Call), and multi-leg strategies (Butterflies, Condors, Combos). It also tests essential concepts of option payoffs, intrinsic and time value, put-call parity, option Greeks, and volatility. The examination consists of 60 multiple-choice questions to be completed in two hours, with a 60% passing score and 25% negative marking per incorrect answer. The certificate is valid for 5 years.

Assessment

60 multiple-choice questions, drawing from three chapters covering the introduction to options, option strategies, and volatility.

Time Limit

2 hours (120 minutes).

Passing Score

60% (60 out of 100 marks). Negative marking of 25% of the marks assigned to a question applies for each wrong answer.

Exam Fee

Rs. 2,596 (inclusive of GST). (NSE Academy / National Stock Exchange of India)

NCFM Options Trading Strategies Exam Content Outline

12%

Introduction to Options

Core option terminology, exercise styles (American vs European), payoff formulas, intrinsic and time value, put-call parity relationships, and option pricing inputs.

86%

Option Strategies

Step-by-step setup, objective, risk-reward profiles, break-even calculations, and payoffs at expiration for 22 strategies (Long/Short Call, Long/Short Put, Synthetic Long Call, Covered Call, Covered Put, Long/Short Straddle, Long/Short Strangle, Collar, Bull/Bear Spreads, Butterflies, Condors, Combos).

2%

Volatility

Understanding historical volatility, implied volatility, VIX index, and volatility's impact on pricing and margins.

How to Pass the NCFM Options Trading Strategies Exam

What You Need to Know

  • Passing score: 60% (60 out of 100 marks). Negative marking of 25% of the marks assigned to a question applies for each wrong answer.
  • Assessment: 60 multiple-choice questions, drawing from three chapters covering the introduction to options, option strategies, and volatility.
  • Time limit: 2 hours (120 minutes).
  • Exam fee: Rs. 2,596 (inclusive of GST).

Keys to Passing

  • Complete 500+ practice questions
  • Score 80%+ consistently before scheduling
  • Focus on highest-weighted sections
  • Use our AI tutor for tough concepts

NCFM Options Trading Strategies Study Tips from Top Performers

1Focus heavily on the Option Strategies section, which accounts for 86% of the exam weight. You should know how to construct each of the 22 strategies.
2Practice calculating break-even points, maximum profits, and maximum losses for all main strategies, especially spreads, straddles, strangles, and covered calls.
3Understand the market outlook associated with each strategy (e.g., when to use a collar vs a protective put, or a bear call spread vs a bear put spread).
4Pay close attention to option payoffs at specific expiration prices; many questions present a scenario and ask for the net profit or loss in Rupees.
5Because of the 25% negative marking, avoid wild guessing. If you can eliminate two wrong choices, it is mathematically advantageous to guess, otherwise skip the question.
6Familiarize yourself with the India VIX and how changes in implied volatility affect option premiums (Vega) and writing margins.

Frequently Asked Questions

How many questions are on the NCFM Options Trading Strategies exam and how long is it?

The exam has 60 multiple-choice questions and must be completed in 2 hours (120 minutes).

What is the passing score for NCFM Options Trading Strategies?

The passing score is 60%, meaning you must score at least 60 out of 100 marks. There is also a negative marking of 25% of the marks assigned to a question for each wrong answer.

Does this NCFM module have negative marking?

Yes. There is a negative marking of 25% of the marks assigned to a question, which equates to a deduction of 0.25 marks for a 1-mark question if answered incorrectly.

What is the fee and certificate validity for the module?

The examination fee is Rs. 2,596 (inclusive of GST). The certificate is valid for 5 years from the date of passing the examination.

What are the prerequisites for this exam?

There are no formal prerequisites, but it is highly recommended to complete the NCFM Derivatives Market (Dealers) Module first to ensure you understand basic option mechanics, terminology, and Greeks before attempting strategy calculations.

Are these official NCFM practice questions?

No. These are original practice questions created by OpenExamPrep to help you prepare. NSE Academy does not sponsor or endorse these materials.