Equity-Derivatives Quiz – 7

Closest forward price of a share if: Spot = Rs 425, Interest = 12%, Maturity = 1 year

Trader sold a call (strike = Rs. 200) for Rs. 12. What is his max loss?

Trading members must maintain more capital adequacy than clearing members – True or False?

Mr. Ravi buys 10 call options @ Rs. 20 (strike = 350). Stock closes at 310. He will choose:

Which of the following complaints is redressable by the exchange?

A short position in a CALL option can be closed by buying a PUT option of same strike and expiry – True or False?

Loss incurred on derivatives transactions can be carried forward for a period of 12 assessment years – True or False?

Which of the following issues are solved by futures compared to forwards?

The concept where small margin gives larger exposure is known as______.

Trader is bearish on certain companies but bullish on the market. Most appropriate strategy?

Can Professional Clearing members act only on behalf of institutional clients?

A call option gives the holder a right to buy how much of the underlying from the writer?

The option which gives the holder a right to buy the underlying asset before or on a particular date is called as __.

A trader shorted 1 Sept ABC futures @ Rs.1800 (lot size 50), and booked Rs. 5000 profit. Which action closed the position?

Q7. Initial margin required from Mr. X and Mr. Y combined (Lot size = 50, Margin = 6%): Mr. X sells 11 Feb contracts @ Rs. 6300
Mr. Y sells 13 March contracts @ Rs. 6450

A person who is bullish and a payer of premium is a.

As per Accounting Standards, the initial margin paid by an option seller is shown under_____in the balance sheet.

The idea and economic rationale of introducing forward contracts is to.

If you have a long or short position in a futures contract, this can be closed by initiating a reverse trade – True or False?

Trading members shall maintain a higher level of Book networth than the clearing members – State True or False?

Can Professional Clearing members act only on behalf of institutional clients?

Trading members shall maintain a higher level of Book networth than the clearing members – State True or False?

If you have a long or short position in a futures contract, this can be closed by initiating a reverse trade – True or False?

The idea and economic rationale of introducing forward contracts is to.

As per Accounting Standards, the initial margin paid by an option seller is shown under_____in the balance sheet.

A person who is bullish and a payer of premium is a.

Q7. Initial margin required from Mr. X and Mr. Y combined (Lot size = 50, Margin = 6%): Mr. X sells 11 Feb contracts @ Rs. 6300
Mr. Y sells 13 March contracts @ Rs. 6450

A trader shorted 1 Sept ABC futures @ Rs.1800 (lot size 50), and booked Rs. 5000 profit. Which action closed the position?

The option which gives the holder a right to buy the underlying asset before or on a particular date is called as __.

A call option gives the holder a right to buy how much of the underlying from the writer?

Closest forward price of a share if: Spot = Rs 425, Interest = 12%, Maturity = 1 year

Trader is bearish on certain companies but bullish on the market. Most appropriate strategy?

The concept where small margin gives larger exposure is known as______.

Which of the following issues are solved by futures compared to forwards?

Loss incurred on derivatives transactions can be carried forward for a period of 12 assessment years – True or False?

A short position in a CALL option can be closed by buying a PUT option of same strike and expiry – True or False?

Which of the following complaints is redressable by the exchange?

Mr. Ravi buys 10 call options @ Rs. 20 (strike = 350). Stock closes at 310. He will choose:

Trading members must maintain more capital adequacy than clearing members – True or False?

Trader sold a call (strike = Rs. 200) for Rs. 12. What is his max loss?

Securities Transaction Tax (STT) is levied on:

Who defines contract size in the futures market?

In options, seller pays upfront premium at contract entry – True or False?

In which contract is gain/loss realized daily via mark-to-market?

A calendar spread in index futures becomes____when near-month contract expires.

The main objective of derivatives is to enable market participants to        

Higher the interest rate, the higher the CALL option premium – State True or False?

A Buyer or holder of the option is the party to the contract who has___________.

The Trading members on the exchange’s derivatives segment are not required to be registered with SEBI. State True or False?

A unique principle of futures trading makes trading possible for those who do not want to make or take delivery of underlying assets. Which is that principle?

On the National Stock Exchange, for its index futures, what would be the opening day of its April series?

Operational risks include losses due to             

The total number of outstanding / unsettled contracts in the market at any point of time is known as “OPEN INTEREST”. True or False?

The clearing corporation may utilize the client account margins deposited with it for fulfilling the dues which a clearing member may owe. State True or False?

A clearing member has deposited eligible liquid assets of Rs.75 lacs. The exchange has minimum liquid net worth requirement of Rs. 50 lakhs. The member has not entered into any transactions so far. What is the margin available for trading (in lakhs)?

Is it true that an efficient cash market is required for an efficient futures market?

If the price of a future contract increases, the mark-to-market margin account of the holder of the short position in that contract is credited for the gain. True or False?

The absolute amount of minimum capital adequacy requirement for derivative brokers is same as that for cash market – True or False?

Change in option premium for a unit change in________is known as Rho.

40. The ‘Ask’ price is the price at which____________.

In India, futures and options on individual stocks are allowed on_____.

Higher the price volatility, higher would be the initial margin requirement – True or False?

In a derivative exchange, the net worth requirement for a clearing member is higher than that of a non-clearing member. True or False?

The strategy of buying a put option on a stock you are owning is known as _____.

All active members of the Exchange are required to make initial contribution towards Trade Guarantee Fund – True or False?

An increase in the interest rates will lead to______.

In a forward contract, the party that agrees to sell the underlying asset on a future date for a specified price is said to have assumed_______.

Mr. Hitesh is a trading member. One of his clients has purchased 12 contracts of March series index futures and another client has sold 10 contracts. The exposure of Mr. Hitesh is____________.

In case of Call options, if the market price is less than the exercise (strike) price, the option will_______.

Does the difference between exercise price of the option and spot price affect option premium?

A high initial margin level improves solvency & financial capability of the clearing corporation – True or False?

An American put option gives the buyer the right but not the obligation to sell to the writer an underlying asset at a specified price on or before the expiry date – True or False?

A futures contract is usually referred to by its delivery month – True or False?

Mr A sold a put option of strike Rs.400 on PQR stock for a premium of Rs.32. The lot size is 500.
On the expiry day, PQR stock closed at Rs. 350. What is his net profit or loss?

In an Index Futures contract, the tick size is 0.2 of an index point & the index multiple is Rs 50, then ‘a tick’ is valued at:

The securities which are placed by clearing members with the clearing corporation as a part of liquid assets are:

Contract month means:

Initial margin is calculated based on:

Daily ‘Trading Price Limits’ define the maximum percentage by which the price of a future contract can rise above or fall below the previous day’s settlement price – True or False?

For portfolio hedging by institutions and mutual funds, index based derivatives are more suitable and more cost effective than derivatives based on individual stocks – True or False?

A Trading cum Clearing Member is responsible to the exchange for his transactions & also for the position of his trading members under him – True or False?

A default by a member in the derivatives segment will not be treated as a default in the cash segments of that exchange – True or False?

Does trading in derivatives become expensive due to high margins?

_______risk is the component of price risk that is unique to particular events of the company and/or industry and this risk could be reduced to a certain extent by diversifying the portfolio.

The Clearing of trades on a stock exchange can be done by:

In an ‘In the money’ PUT option:

Delta measures the expected change in the option premium for a unit change in:

In an Out-of-the Money (OTM) Put option:

Diversification is used to control Systematic Risks – True or False?

A trader sold an ABC Stock Futures Contract at Rs.354 & the lot size is 900. What is the trader’s profit or loss if he purchases the contract back at Rs.341?

When would a trader make a profit on a short position of September futures?

Which of the following is not an application of indices?

Options contracts are not symmetrical with respect to rights & obligations of the parties involved – True or False?

Time value and intrinsic value of a call option are always either positive or zero – True or False?

The gain or loss is realized on a daily basis due to mark to market mechanism in which of the following contracts?

The market price of a share is Rs 120 and the 110 Call is quoted at Rs 24, what is the intrinsic value of this Call option?

The main logic behind Position limits is to________.

The seller of the put option gains if price of underlying asset____________.

A portfolio with 50 different stocks is twice as risky as another portfolio with 100 stocks in it – State whether True or False?

Mr A buys a call option with lower strike price and sells another call option with higher strike price both on the same underlying share and same expiration date, the strategy is called______.

Futures trading is considered more risky than equity trading due to_________.

Institutional investors pay higher margins than the individual investors for derivatives trading – State True or False?

The derivatives segment of a Stock Exchange is under the same governing council as the cash segment – State True or False?

You have bought a futures contract and the price drops, you will________.

Stock price is___________.

A naked call option strategy means that the writer does not currently own the underlying – State True or False?

Factor(s) influencing option pricing include which of the following?

When ordinary cash dividends are declared, put option values will decrease – State True or False?

A Writer of an option________.

The daily settlement prices of equity derivatives are decided by______.

The maximum possible loss for the option buyer is the premium paid, but the profits can be higher depending on the underlying price movement. This is true for which type of options?

If a Clearing member defaults, the margin paid on his own account only is allowed to be used by the clearing corporation for realizing its dues from the member. The clients margin remain unaffected – State True or False?

A future contract is a very standardized contract that leaves very little (except the price) open to negotiation – State True or False?

Shorter the time to maturity of the call option, higher will be the time value – State whether True or False?

Mr. Anand asks his broker to buy certain number of contracts at the market price, this instruction is called__

A Client Registration form contains client’s __________.

Any person who wishes to open a Trading Account must be given the following documents by his trading member –

The ‘ASK’ price is always_____________.

Mr. Mohan entered into a contract with Mr. Soham to buy 500 bags of Cotton at a price of Rs 800 per bag. Delivery of goods and payment of money will take place 4 months from now. Both Mr. Mohan and Mr. Soham have a right as well as an obligation under this contract. What type of contract is this?

The process by which a futures contract is terminated by a transaction that is equal and opposite to the original transaction is called_________.