Equity Derivatives Quiz 5

The Stock Exchanges and Stock Brokers decide the option premiums — True or False ?

The Indian Stock Future Markets deals in ____________.

Usually as the level of risk rises, the expected rate of return on that investment should also rise – True or False ?

The system of SEBI which enables investors to lodge and follow up their complaints and track the status of redressal of such complaints from anywhere is called SCORES
— True or False ?

A short seller has the time of one week to deliver the stocks – True or False ?

For liquid Net-worth requirements, the total liquid assets comprise of at least 60% of the cash component and the rest is non cash component – True or False ?

In the accounting system of open options as on Balance Sheet day, the “Provision for Loss on Equity Index/ stock Option Account” is shown as deduction from “Equity
Index/ stock Option Premium” which is shown under ______________.

Operational risks include losses due to _______________.

A tax which is clearly mentioned in the Contract Note is _____.

______________refers to when securities professionals making unnecessary and excessive trades in customer accounts for the sole purpose of generating commissions.

What role do speculators play in the Futures Market ?

As per the L.C.Gupta Committee recommendations a separate investor Protection Fund must be created for derivatives segment – True or False?

An index option is a Money Market Instrument – True or False ?

Option which gives buyer a right to sell the underlying asset, is called____ option

If there is not much price movement, the OTM option will be beneficial to ______.

A Trading member can either clear his trades or use the services of Professional Clearing members – True or False ?

A Broker or Dealer who is already registered with an existing stock exchange will have to get additional registration for the Derivative Exchange – True or False ?

The cash component of Liquid Securities can include Units of money market mutual fund and Gilt funds where applicable haircut is 10%. — True or False ?

Tick size depends on __

Impact cost is low when_______.

In the Options segment, if you buy a CALL, you expect the market/scrip to move ___ .

An Investor who is less risk averse would like to have greater exposure to equity and other risky investments compared to fixed Income instruments – State True or False?

Forward contracts are OTC contracts – True or False ?

You are bullish on a stock but unsure of the overall market. The action you should take is :

A trader sells a lower strike price CALL option and buys a higher strike price CALL option, both of the same scrip and same expiry date. This strategy is called __ .

The Over the counter options are __

Financial Derivatives are used for –

If you buy a PUT option at premium of Rs 20 at the Strike Price of Rs 250, lot is of 400 shares, then the maximum possible loss is ____

The future contracts are custom designed and hence each contract is different as per the terms of the contracting parties.

Which risks can be managed by selling Index Futures ?

A buyer of Put Option –

A long position in a CALL option can be closed by taking a short position in PUT option.

If a stock has very low volatility then it would have a lower option premium.

In index futures, if the near leg of the calendar spread transaction expires then the farther leg becomes a regular open position.

In the derivatives market, all the margins are collected by ______.

A______ is created by shorting a call and a put option of same strike and same expiry.

Theta is the rate of change in option premium for a change in the price of the underlying asset.

When a call option is ‘ In The Money ‘ – the _________.

Delta is the change in option price given a one-day decrease in time to expiration – State True or False ?

___________ is minimum move allowed in the price quotations.

In the Options segment, if you buy a PUT, you expect the market / scrip to move_____

Arbitrage activities would ensure that the prices of futures contract is aligned with the prices of the underlying assets. True or False

In futures contract the lot size is determined by ________.

As the expiry / maturity of a futures contract approaches, the spot price and future price tend to become same. This is known as _________________.

If you buy a PUT option at premium of Rs 37 at the Strike Price of Rs 260, then the maximum possible loss on this position is________

A low level of initial margin increases the possibility of defaults of a stock broker – State True or False ?

calendar spread contract in index futures attracts higher margin than sum of two independent legs of futures contract.

An American Option can be exercised only on the expiry date – State True or False ?

If futures price are lower than spot price of an asset, market participants may expect the spot price to come down in future. This situation is called –

When the strike price decreases, the premium on call option increases.

In BID-ASK price, the bid price is the price at which ___________.

The major reason for collecting high initial margin is to improve the solvency of the clearing corporations.

A Clearing member is required to provide liquid assets and these liquid assets should be at least 75% in cash, bank FD’s etc and balance 25% in non cash assets. True or False ?

Beta is the change in option price given a one percentage point change in the risk-free interest rate.

In futures market, basis is referred to as.______.

An option which would give a zero cash flow to its holder if it were exercised immediately is know as _______.

‘You have sold one lot of JSW Steel futures for Rs 300 (lot size 2000) expecting that this share price will go down. But you also wants to protect yourself against any loss of
more than Rs 10,000. What should you do ?

You have sold one lot of JSW Steel futures for Rs 300 (lot size 2000) expecting that this share price will go down. But you also wants to protect yourself against any loss of
more than Rs 10,000. What should you do ?

A buyer of Call Option —

You are interested in creating a perfect hedge for your portfolio. For this you need to sell index futures and the index futures sold should be equal to____

The holder of an option has________.

The intrinsic value is the difference between Market Price and Strike Price of the option and it can never be negative.

The risk return profile of an option contract is ________.

Arbitrage is a tool used to protects ones portfolio against any downturn by going short in index. True or False ?

When a person buys a call option, he has an —

In the Option segment, if you buy a CALL at a premium of Rs 35 at the Strike Price of Rs 400, lot is of 200 shares, then the maximum possible Profit is

In the Straddle Strategy both options have same strike price but in Strangle strategy, the strike price are different and are mostly out of the money options- True or False ?

When compared to cash market, there are more chances that an investor does not properly understand the risks involved in the derivative market. True or False?

Hedgeing is a tool used to protects ones portfolio against any downturn by going short in index. True or False ?

The spot price of ABC share is Rs 500, the call option of Strike Price Rs 500 is –

A client G1 has bought 1 contract of ABC futures May series at Rs 3240. The closing price of this share when the market closed on last Thursday of May was Rs 3188.
What is his Profit (+) or Loss (-) ? (Market lot 100)

When a trader buys a put option, he has an—

In a Derivatives Market, the person who takes the risk are ______

The difference between the bid price and the ask price is_____.

By meeting additional requirements, a Trading Member can also be a Clearing Member — True or False ?

The option premium paid by the option buyer remains with the exchange till the time it is closed out or expired.

Higher the interest rate, higher will be the Call option premium – True or False?

A major recommendation of L.C.Gupta Committee was that a separate Investor Protection Fund must be created for derivatives segment-State True or False?

Ashort seller_______.

Position limits have been designed to ______.

The mark to market debits for stock futures are done on a –

Derivatives market helps shift of speculative trades from unorganized market to organized market. True or False ?

If you have a long position in futures contract, you can square up it by _____.

The Ask price is always greater than Bid price. True or False ?

An investor who is risk averse will invest more in Fixed Income and Debt instruments than to equity market related investments.

A stock broker has two clients P and Q. P has purchased 200 contracts and Q has sold 300 contracts in May Tata Steel futures series. What is the outstanding liability
(open Position) of the member towards Clearing Corporation in number of contracts?

Impact Cost is the measure of liquidity – True or False ?

The difference between the spot price and the futures price is called tick.

In the Options segment, if you sell a PUT, you expect the market/ scrip to move ___.

A put option gives the buyer the right to _____.

Aperson sells a put option of Strike Price 265, market lot 1000, at a premium of Rs 40, the maximum profit he can make is _______.

_____pays the initial margin when entering into a futures contract.

The Clearing Corporation has the power to charge special margin if it may think fit.

The right to buy an asset for a certain price on or before a specified date is the characteristics of a_________.

Contract month is the month in which futures contract —

Derivative markets mostly comprises of ___

Liquid Assets offered by a Clearing Member to the Clearing Corporation can include Mutual Fund Units and Bank Gaurantees. True or False ?

In the Option segment, if you sell a CALL at a premium of Rs 45 at the Strike Price of Rs 400, lot is 200 shares, then the maximum possible loss is ____

When a person sells a call option, he has an —

You have bought a portfolio of securities on the exchange To eliminate the risk arising out of market, you should_______.