Currency Rate Derivatives Quiz 6

An exporter hedges 20000 USD by buying September 2020 USDINR Put option at a strike price of Rs 73.00 when the price was Rs 0.47/0.49 . The exporter received USD in his account on 20th September. He decided to cancel the option on 20th September when the price for the same contract was Rs 0.22/0.24. How much loss did the exporter make on cancelling the Put option if the latest available RBI USDINR reference rate was Rs 72.50?

Who decides the price for market order?

An Indian investor has invested Rs 187500 in US securities at an USDINR exchange rate was 75 . One years late, he noticed that his investment had gained 10% in terms and liquidated his investment. He repatriated the money to India at then existing exchange rate of 66. What would be the real returns (returns in INR terms)?

A trader in currency markets believes that EURUSD will move from 1.18 to 1.30 in next 2 months. Which of the following would you do to execute this view using currency futures contract of EURINR and USDINR?

A hedger has a grievance against a trading member and he uses the mechanism of Arbitration to settle the dispute. Generally in how many days / months does the arbitrator gives his decision from the date of initial hearing?

A trader executes a currency futures trade – Buys USDINR and sells GBPINR for an equivalent amount. What view has he executed?

In modern times, in which of the following asset classes did derivatives start trading first?

A trading member (TM) buys 9 lots of April USDINR futures and also sells 9 lots of May futures in his proprietary book. On the same day, a client of the TM buys 9 lots of April futures and sells 9 lots of May futures. What would be the open position (in USD) of TM and his client at the end of the day?

Which statement best describes the rule for reporting the closing of a position by a trading member (TM) of the exchange?

Sumit buys one lot of USDINR futures and after half an hour of buying, the price of the contract moved by 100 ticks. By how may rupees has the value of contract
changed?

State True or False – Selling a call option means having an obligation to buy an underlying asset.

In OTC spot market, the default mode of settlement is always______

A trading member buys 80 lots of USDINR at 74.50 and sells 90 lots the same day at 74.60. The settlement price for the day was 74.30. What would be his mark to market margin (MTM) on the open positions ?

Which of the following statement best describes the guidelines for brokers advertising their business in a public media?

It is expected that the volatility can increase. Will this generally lead to an increase in option premium?

GDP growth higher than expected would have what type of impact on currency of a large developed country? (Assuming everything else remaining same)

Mr Kohli invested Rs 1,00,000 in US Stock Markets when the USDINR rate was 60. After one year his investment appreciated by 18% in USD terms. He sold of his investments and repatriated the money to India at the then existing rate of 62. What is his real returns in INR ?

A person has a requirement to buy one unit USD and also to sell one unit of USD in OTC spot market at the same time but in different banks. Both the banks quoted same price as 75.31/75.35. In this transaction, how much currency conversion profit/loss hs the person made as compared to a situation where he had export and import transaction in the same bank and import payment could be made from export receivables?

The minimum net worth requirement for a company to be eligible for applying to become an authorized exchange for currency futures is Rs _____

Sriniwas is an employee of a broking house and has a very good track record in identifying likely trend in currency movement. According to his analysis, INR should
appreciate against USD in next six months. He advised some of his clients to take a short position by selling USD against INR and he guaranteed against losses. The
supervisor of the employee takes an action against him for violating certain trading guidelines. What should the employee have done to avoid the punishment?

_______ typically the market makers in OTC market for currency options.

The settlement date for exchange traded currency futures is ________.

Mr. Mayur sells 10 lots of GBPINR 1 month futures when the price was 98.60/98.90 and squares off 5 lots after a week when price was 99.60/99.80.How much money did he make/lose on the part of the transaction that was squared off?

What are the parameters used by RBI to decide which banks could run foreign currency-INR option book?

Which of these conditions have to be satisfied for an AD category 1 bank to become a trading and clearing member on any of the recognized currency futures exchange?

A trading member (TM) has two clients “X” and “Y” and he also does proprietary trading in currency futures. On day 1, TM buys 20 lots of USDINR one month futures and also sells 2 lots of the same contract on the same day in his proprietary book. On the same day, client “x” buys 12 lots of USDINR one month futures and also sells 2 lots of the same contract while client “Y” buys 12 lots and sells 2 lots of USDINR one month futures. What would be the open position (in USD) of the trading member, client “X” and client “Y” respectively at the end of day 1?

If 10 units of gold was valued at INR 45000 and the same was valued at USD 600. As per the gold standard methodology, what would be the value of one USD in terms of INR?

Of the below options, which one is true for Exchange Traded Derivatives?

Which term best describes JPY currency?

Which of these best describes the timing for collection of Mark to Market margins ?

A medium sized exporter of India is very concerned about the increased currency volatility in the market as it creates uncertainty in planning further investments. He therefore gets into a derivative contract with a bank who is willing to take the risk of currency volatility in exchange of a fee payment. What economic function is being performed by the derivative contract?

The currency futures price of USD is at a premium to INR. If the USDINR spot is 75 and a trader thinks that on expiry of one month USDINR futures, the spot may remain at 75. Assuming everything else remaining the same, what currency futures trade strategy would be profitable to him if his views comes correct?

How can the trading member recover the mark-to-market margin of a client if the client defaults on paying mark to market margin?

The lot size of JPYINR futures contract is__________.

Suresh executes the following currency futures trade — Sells GBPINR and Buys EURINR for an equivalent amount. What view has he executed?

Mr. Balbir Singh has invested USD 8,000 in US equities and get an exchange price of 73 from its bank for converting INR into USD. In next two years his investments in US equities appreciated in value to USD 9,000. He sold off his portfolio and repatriated the capital and profits to India . His effective return after considering currency risk, on the investment turned out to be 12%. What exchange price Mr. Balbir would have received at the time of converting his profits from USD into INR?

At the start of week, EURUSD is 1.75 and GBPUSD is 1.90. At the end of week, EURUSD is 1.7810 and GBPUSD is 1.88. Which of the following best describes the price movement?

A trader expects USDINR to remain stable at 73.00 levels over next one month. One month USDINR premium is 40 paise. What is the likely trade that trader would do to execute the view and how much profit he would make per USD if his views comes correct?

One month USDINR is quoting at 75.25/75.50 in the futures market. The OTC for the same maturity is quoting at 76.00/76.10. Which of the following describes the possible arbitrage trade and possible arbitrage profit per USD if the arbitrage trade is carried till maturity?

Any policy matter which may give a boost to inflow of foreign capital in India may result in what kind of movement of INR against EUR? ( Assume everything else remaining the same)

The maximum Net NPA % for AD Category 1 Bank for it to become trading and clearing members of the currency futures segment of the recognized stock exchanges is___.

The current spot is 75, what would be the moneyness of a long USD Call option with a strike price of 75?

What is the process of computing open positions and amount of mark to market margin payment/receipt called ?

One of the reason for growth of financial derivatives is__________.

Assume that USDINR was quoting at 75.02/75.04 and EURUSD was quoting at 1.1888/1.1893 in the morning and by the day end USDINR moves to 75.22/75.24 while EURUSD moves to 1.1808/4.1810. What would best describe the movement of the currency during the day?

At what time does the GBPINR futures contract stops trading on the contract expiry day ?

If one year interest rate is 2% in UK and 7 % in India. If current GBPINR spot rate is 98, which of the following could be closest to the six month future rate of GBPINR?

Mr. Patil in India expects international gold prices to rise by 20% from USD 1700 per ounce to USD 1900 in next six months. To benefit from the view, he buys 300 grams of gold at Rupees 5000 per gram and also sold 10 lots of 6 month USDINR futures at 73. After six months, the trader sold gold at Rs 5200 per gram and unwinds currency futures at 74.5. Assuming 1 ounce is equal to 30 grams , which of the foll best describes the return for investor and the hedging strategy that Mr. Patil may have used?

Broker Mr. Mehta charges a brokerage of Rs 40 per lot of USDINR futures on only one leg of the transaction if its squared off the same day. Broker Mr Shah charges Rs 25 per lot of USDINR futures on both the legs even if its squared up on the same day. A client buys 20 lots of USDINR futures and sells of 10 lots the same day and the balance 10 lots after 10 days. What will be the brokerage charged by broker Mr Mehta and Mr Shah respectively ?

What is the frequency of adjusting liquid net worth of clearing members with initial margin?

Which style of options are only traded on Indian exchanges?

The important market which open around afternoon of India time is / are _________.

Who acts as the central counter party to GBPINR future trades in India ?

World over the financial regulators and Government are encouraging what kind of change in dealing with financial derivatives?

Mr. Dinesh, an exporter sells 200 lots of one month USDINR futures at 73. At the expiry, the settlement price was announced at 72.70. How much profit/loss (in Rs) did he make on the transaction?

A trader sells 8 lots of EURINR 1 month future when the price was 72.60/72.70 and squares off 7 lots when the price was 71.50/71.70. How much profit or loss does he make on the trades that were squared off?

An Immediate Or Cancel (IOC) order__________.

Atrader executes a currency futures trade: buys USDINR and sells JPYINR for an equivalent amount. What view has he executed?

When multiple contracts of a series are combined and squared off, then the accounting method which is used to calculate price of currency futures contract is_____.

State True or False – Margins across the various clients of a member are collected on a netted off basis.

A trading member buys 20 lots of USDINR one month futures on day 1 at 74.50 and also sells 12 lots of the same contract on the same day at 74.80 in his proprietary book. The settlement price for the day was 74.40. What would be the mark-to-market margin (MTM) on the open positions?

A person wants to invest in gold by buying gold coin from his bank in INR. Which of the following best highlights the price risks involved in such investment?

Indentify the Act which is mainly responsible for governing the trading of securities in India.

A broker should issue without delay to his client a contract note for all transactions in the form specified by the____.

Mr. Vaibhav writes a call option and receives premium of 65 paise to a USD. Next day the premium for the same call option falls to 30 paise to a USD when spot prices did not change. Which of the following could best explain the drop in option price?

Mrs. Soni has invested INR 100,000 in an Indian corporate bond for a year giving a return of 9% in one year. She plans to use the proceeds from the maturity of corporate bond to fund her daughter’s education in US. At the time of investing in corporate bond , USD INR spot was 73 and one year premium was 5%. She decides to hedge currency risk using USDINR one year futures. At the end of one year, how many USD can she remit to her son?

Which of these statements best describes the guidelines for permission for trading in ‘Pro-Account’ by a trading member?

A trader sells 10 lots of USDINR 1 month futures when price was 74.50/74.70 and squares off 5 lots after a week when price was 73.55/73.75. How much money (in Rs) did he make/lose on the part of the transaction which was squared off?

What is the lot size of an USDINR currency option?

Identify the appropriate strategy for a bearish view on USDINR and trade objective of zero cash outgo.

In the international markets, the risk aversion is increasing and money is moving away from emerging markets like India. In such a case INR likely to ______ against USD, assuming everything else remaining the same.

Rising Star Ltd. company in India does exports and import in USD. The amount of exports are 70% more than the amount of imports and import payment has to be made seven days after realization of export receivables. Which of the following best describes the currency risk involved?

An international trading company has export revenue in USD and it uses part of it to make import payments in USD and balance is converted to INR. The company is concerned about USDINR risk. Which of the following best describes company’s risk and the currency futures strategy that it may use to mitigate the risk?

A garment company has imported machinery from USA. The payment of the same has to be made after three months. To hedge the risk, the company buys a USDINR call option at strike price of Rs 75.00 and pays a premium of Rs 1.60. On maturity of the contract, the settlement price was declared as Rs. 77.10. How much net profit per USD did the company make on the cash settlement of the option contract?

If USDINR futures was trading at 71.0025/71.0050 and the INR appreciates by two ticks. What will be the new trading price assuming no change in the bid-ask spread?

Which organisation issues guidelines for accounting of currency futures contracts?

After the breakeven point is achieved, which of these statements describes the relationship between spot price and profitability of long put option?

A trader has a view that GBP should weaken against USD in the next few months. Assuming USDINR remains the same during the period, what currency futures trade would be profitable to him if his view comes correct?

Seema is a student of economics and believes that GBP should appreciate against INR in the next few months. She decides to execute this view using currency futures. Given this scenario, what type of market participant would this student be?

Which are the basic accounting heads to be maintained by any client for maintaining currency futures accounts?

A trading member buys September USDINR futures at various price points over two days. He buys 20 lots at 74.70 at 10.30 AM on day 1, 10 lots at 2 PM on day 1 and 20 lots at 74.30 at 11.30 AM of day 2. On day 3, he squares off 20 lots at 74.70. Using FIFO method, how much profit / loss has he realized on the squared off ‘ion ? (Ignore tr jon costs)

If one year interest rate is 2% in UK and 8 % in India. If current GBPINR spot rate is 70, which of the following could be closest to the six month future rate of GBPINR ?

Assume that the current USDINR spot is Rs 75. Premium for March 2020 maturity USDINR Put option at strike price of Rs 75.50 as Rs 0.27/0.28 and premium for March 2020 maturity USDINR call option at strike of Rs 75.25 as Rs 0.35/0.36. A client executes a trade where he buys one lot of Put option at strike of Rs 75.50 and sells one lot of Call option at strike of Rs 75.25. On expiry , the RBI USDINR reference rate is Rs 75.50 . How much net profit/loss in INR did the client make on the deal?

For a calendar spread position, the extreme loss margin is charged on of the mark-to-market value of the far month contract.

A trader has strong BEARISH view on JPYINR and he also expects an increase in volatility from the current levels in the coming days. Which option strategy should he use if he wants to execute both views ?

The base price on the first day of launch of a JPYINR currency future contract will be____.

Examine the statement : The profit and loss for an option writer is unlimited.

A trader initiates a long position in USDINR futures contract at a price of 72 by buying 30 lots. At expiry of contract, the settlement price was 71.70. How much profit/loss (in Rs) did he make in this transaction?

A trading member buys 20 lots of USDINR one month futures on day 1 at 74.50 and also sells 30 contracts of the same contract on the same day at 74.80 in his proprietary book. The settlement price for day 1 was 75 and he paid the MTM accordingly at the end of 1 on the carry forward positions. The settlement price for day 2 is 75.60. How much will be his mark to market (MTM) profit/loss pertaining to day 2?

The intrinsic value of ‘In the money” option and ‘At the money’ option is always greater then or equal to zero – State whether True or False?

An Indian investor has invested Rs 340000 in US securities. At the time of investment, the exchange rate was 74. Two years later, he noticed that hi investment has gained 20% in USD terms and liquidated his investment. He repatriated the money to India at the then existing exchange rate of 72. What would be the real returns (returns in INR terms)?

Which of these statements correctly describes relationship between limit price and trigger price for a stop loss SELL order?

Aperson buys a USD call option at strike of 72 and pays a premium of INR 0.65. What would be the breakeven point for the transaction?

As per the rules with respect to monitoring and enforcement of position limits in the currency futures market – Positions during the day are monitored based on the total open interest at the end of the previous day’s trade. This monitoring is for_____.

What is the relationship between limit price and trigger price for a stop loss BUY order?

Mr. Bharat, an exporter submits export order worth USD 5 million to bank as a proof of exposure to foreign exchange risk. As per the order, he would receive payment after six months. Given this, what best describes the eligibility of the exporter for booking forward contract?

In OTC market, one month USDINR is quoting at 73.75/74.00 and futures for the same maturity is quoting at 74.50/74.60. Which of the following describes possible arbitrage trade and possible arbitrage profit per USD if the arbitrage is carried until maturity?

GBPINR three month future is quoting at 70.50 and six month is quoting at 71.10. Mr. Kapil expects that after a month the three month future should quote at 70.30 and the six month should quote at 70.70. If Mr Kapil executes a spread trade and the view goes right, how much profit will he make?

The currency market is most active when_____is / are open.

The amount of asset that has to be delivered under one contract is the _______