Equity Derivatives Quiz 2

Mr. Sam is a equity fund manager and he is bearish on the stock market. How will he use this view to create a hedge?

The absolute amount of minimum capital adequacy requirement for derivative clearing member is higher than that of spot market – State whether True or False?

What will be the Delta for a Far Out-of-the-money option?

A penalty or suspension of registration of a stock broker from derivatives exchange/segment under SEBI (Stock Broker and Sub-broker) Regulations, 1992 can take place if__________.

Can a Equity oriented mutual fund hedge its equity exposure by selling index futures?

A trader buys a January ABC stock futures contract at Rs 768 and the lot size is 1200. What is his profit or loss , if he squares off the position at Rs 778?

Which of these complaints against a trading member can an Exchange take up for redressal?

trader takes a short position in call option, but does not take any offsetting position in the underlying stock. What is this strategy known as

If there are three series of one, two and three months futures open at a given point of time, how many calendar spread possibilities arise?

_________is the ratio of change in option premium for a unit change in volatility.

When the price of a future contract decreases, the margin account_______.

A forward contract is_______.

Brokers and dealers of derivative exchanges have also to be registered with SEBI in addition to their registration with stock exchange – State whether True or False?

‘Bulls’ are those investors who believe the market will rise – State True or False?

In case of forward contracts, the rules regarding the minimum amount by which the price would change and the price limits are specified by an authority – State True or False ?

All the 50 stocks of NSE Nifty index are equally weighed while calculating the index – State True or False ?

The Clearing Corporation gives exposure limits to Clearing Members based on the number of Trading Members using the services of that Clearing Member – State True or False ?

Arbitrage is simultaneous purchase and sale of an asset or replicating asset in the market in an attempt to profit from discrepancies in their prices – State True or False ?

The seller or writer of an option is required to pay initial margin for entering into the option contract. Where is this shown in the balance sheet ?

Which Option gives the holder a right to buy the underlying asset on or before a particular date for a certain price ?

Foreign Exchange can be a part of liquid assets to be maintained by Clearing Members with the clearing corporation – State True or False ?

The book networth criterion for Professional Clearing Members is the same as that for Trading cum Clearing members – State True or False ?

Theta is the rate of change in option premium for a unit change in__________.

What is Unsystematic Risk ?

Future prices are usually more tr0parent than Forward prices – State True or False ?

If the interest rate increases, the premium on CALL option will also increase – State True or False ?

Ms. Gayatri buys a call option of strike price Rs. 300 when the spot price is Rs 337. What is the intrinsic value of this call option ?

Whatis time value of an option ?

Aportfolio of Rs 25 lacs has a beta of 1.20. A complete hedge is obtained by__________.

The beta of a stock is 0.7 and you have a buy position of Rs 3,00,000 in it. Which of the below options will give you a complete hedge?

A derivative market would primarily have_________.

Mr. Sunil wishes to buy a futures contract of Tata Steel shares. He should__________

Forward Contracts are those contracts which can be customised as per the requirements of the concerned parties – True or False ?

Which amongst the following comes under the purview of Securities Contracts (Regulation) Act-1956 ?

Strike price is the price per share for which the underlying security may be purchased or sold by the option holder – State True or False ?

A penalty or suspension of registration of a stock broker from derivatives exchange/segment under SEBI (Stock Broker and Sub-broker) Regulations, 1992 can take place if ______

The losses for a seller of a Call options are________

A trader sells a future contract and prices rises. The trader will_________if he squares up the position.

The quality of the underlying asset is standardized by the______in case of futures contract.

The Bye Laws of an Indian Stock Exchange are to be approved by_____.

Clearing member Ram has 6 trading members who are all in Mumbai and Clearing member Shyam has 6 trading members who are all outside Mumbai. Both of them have deposited same amount of liquid assets with the clearing corporation. Which amongst the following statement is True?

Which one of the below mentioned option will result in a Bear Spread ?

Are Treasury Bills included in the list of permitted liquid assets which can be offered to Clearing Corporation by the Clearing Members ?

The Spot Price of ABC Stock is Rs. 347. Rs. 325 strike call is quoted at Rs. 39. What is the Intrinsic Value?

Options which are traded on a recognised exchange ie. Exchange traded options are_______

You sold one SBI Ltd. futures contract at Rs.260 and the lot size is 1,000. What is your profit or loss, if you purchase the contract back at Rs.251 ?

Margins in futures trading are applicable to –

An in-the-money option is a option with ______

All the orders entered on the Trading System of a Derivative Exchange are at Prices exclusive of brokerage. True or False ?

If a person buys a share in one market and the simultaneously sells in a different market to benefit from differentials is known as.______.

Client A has purchased 10 contracts of December series and sold 7 contracts of
January series of the NSE Nifty futures. How many lots will get categorized as regular
(non-spread) open positions?

Whom does the Clearing Member need to consult for setting limits on the trading members clearing through him?

If the price of far month futures is less than the price of near month futures, it is called as _______.

What does a seller of Put Option expect?

What does a beta of more than 1 mean?

You sold a call option on a share. The strike price of the Call was Rs 250 and you received a premium of Rs 16 from the option buyer. What can be the maximum loss on this position?

Clearing Corporation of an Exchange guarantees settlements of exchange tradd contracts – State whether True or False?

In the derivatives segment, who has to pay the margins as specified by the Clearing Corporation?

When a dealer is doing trades in his own account and also doing trades for their clients then these two trades have to be completely segregated – State True or False?

When a person enters into a forward contract, the loss that can occur on the position is _______.

As per the SEBI Act, the board members of Securities Exchange Board of India are appointed by_______.

Can a long position in a Put option can be closed out by taking a short position in a call option with identical exercise date and exercise price ?

In the case of futures contract, the profits or losses are received / paid only on maturity – State whether True or False?

Mr. Ashu has bought 100 shares of ABC at Rs 980 per share. He expects the price to go up but wants to protect himself if price falls. He does not want to lose more than Rs. 1000 on this long position in ABC. What should Mr. Ashu do?

Intrinsic value is always positive for in-the-money options and zero for out-of-the money options – State True or False ?

The minimum Networth for clearing members of the derivatives clearing corporation/house shall be _____.

_________is ISIN code allotted on client onboarding and serves as an exclusive identification of the client.

If futures price is higher than spot price of an underlying asset, this is known as_________.

On the derivatives exchange, a trading cum clearing member has a client who has purchased and sold 600 and 350 contracts respectively in the August series of PQR futures (contract multiplier 50). The trading cum clearing member has purchased and sold 300 and 850 contracts respectively on his own account in the same August series of PQR futures. What is the outstanding liability (open position) of the member towards Clearing corporation in the number of contacts ?

Mr. Ashish is a portfolio manager and he is bullish on the market. What should be his course of action ?

Can one sell assets in futures market even if he does not own any such assets ?

State True or False – The mark-to-market of index futures is daily valuation of open positions as per the current market prices.

If on the auction day, there are no sellers for a particular short delivery, what will the Clearing Corporation do regarding the outstanding transaction?

In respect of Margin account – What will be done if the prices of future contract increases ?

When there is a ‘Closing buy transaction’, this will have the effect of partly or fully offsetting__________.

An ideal index should contain _____shares

Which of these CALL options are Out of The Money (OTM) ?

A farmer agrees to sell 100 tonnes of sugarcane to a factory after 2 month at a specific price. What is this type of contract known as ?

Mr Rohit has bought 8 lots of contracts of June BSE Sensex futures and sold 6 lots of contracts of July BSE sensex futures. What is his regular – non spread open position ?

An European option can be exercised only on expiry date – State True or False ?

___________are eligible to clear trades in Index Options.

Among the given options, which one can be the principal driver of the movement of stock index ?

High level of initial margins deter brokers and clients from trading in the derivatives market – State True or False ?

Investors who are called Bulls are those investors who believe the market or stock will fall – State True or False ?

When a futures contract is entered,__________.

It is recommended but not compulsory for the trading members to have dealers and sales personal in the derivatives market who have passed a certification programme approved by SEBI-State True or False?

Derivatives can have______as an undrlying.

The liquid assets which are to be deposited by the clearing member can be in the form of ______.

On exercise of the option, the seller/writer will pay the adverse difference, between the final settlement price as on the exercise/ expiry date and the strike price. Such payment will be recognised as a _______.

Mr. Deshmukh took a short position of one contract in May Nifty futures (Contract multiplier 50) at a price of Rs. 5600. When he closed this position after a few days, he realized that he has made a profit of Rs.5000. Which of the following closing actions would have enabled him to generate this profit ?

You sold a Put option on a share. The strike price of the put was Rs.245 and you received a premium of Rs.49 from the option buyer. Theoretically, what can be the maximum loss on this position?

A person has bought an option so cannot lose more than the option premium paid.

Three Call series of same strike price of State Bank of India stock-June, July and August are quoted. Which will have the lowest option premium ?

The Clearing Corporation can transfer a defaulting members client’s position to___________.

Mr. Nayar has purchased 8 contracts of March series and sold 6 contracts of April series of the NSE Nifty futures. How many lots will get categorized as Regular (non-spread) open positions?

_________measures the sensitivity of the option value to a given small change in the price of the underlying asset.

Of the below mentioned options, which would attract margins ?

Mr. Somg purchases a call option on a stock at Rs. 10 per call with strike price of Rs. 140. If on exercise date, stock price is Rs. 168, ignoring transaction cost, Mr. Singh will choose_____

You have bought a CALL of ITC Ltd of Strike price of Rs 200 of January To close the position, you will SELL a PUT of same strike price of January True or False ?

Mr Prashant has bought one lot of ABC futures for Rs 75 (lot size 2000) expecting that this share will go up But he also wants to protect himself against any loss of more than Rs 3000 What should he do?