PRACTICE QUESTIONS-2 – 50 Ques

There is higher flexibility in fixing forward contract specification as compared to futures – True or False?

In Option Spreads there is a combination of options constructed in such a way that there is limited profit or limited loss – State True or False?

If the price volatility of the underlying stock is high then the Put option will.

It’s common to have derivatives contract without any expiration date – State True or False?

When a dealer is doing trades in his own account and also for clients, these trades must be completely segregated – State True or False?

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

Mr. Arvind is bullish on the market but bearish on specific stocks in his portfolio. What strategy should he adopt?

means the maximum exposures in terms of number of options and futures contracts that an investor can hold on one side of the market.

How can you close a short position in a futures market?

In exercising a call option on an index, the option holder receives from the writer an amount equal to excess of spot price over strike price – True or False?

What does hedging do?

A trader sells a futures contract and the price rises. The trader will.

What does a beta of more than 1 mean?

Intrinsic value of an option is the sum of Option premium and Time value – True or False?

Which of these statements is True?

The Intrinsic Value is zero for out-of-the-money options but always positive for in-the-money options – State True or False?

Speculator accepts the risks in search of profits – True or False?

A Clearing Member has to deposit                to clearing corporation which forms part of the security deposit.

Exposure levels of Clearing Members are                correlated with the Liquid Assets maintained with the Clearing Corporation.

When ordinary cash dividends are declared, Call Option values will decrease – True or False?

In Index futures, an open position can be settled by.

The holder of a long position in a PUT option will gain if the price of the underlying asset

When the price of a futures contract increases, the margin account .

A Forward Contract.

Suppose you are a trading member who bought 14 and sold 7 April series index futures contracts. What will be your exposure?

A mutual fund manager is bearish on the market and wishes to reduce its exposure to equities from 50% to 40%, without selling any of his equity holdings. Can he sell index futures for it?

For a derivative exchange, the networth requirement for a clearing member is always less than that for a non-clearing member – State True or False?

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

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

Derivatives brokers/dealers are expected to know their clients and ensure product suitability – State True or False?

In Option Spreads there is a combination of options constructed in such a way that there is limited profit or limited loss – State True or False?

If the price volatility of the underlying stock is high then the Put option will.

It’s common to have derivatives contract without any expiration date – State True or False?

When a dealer is doing trades in his own account and also for clients, these trades must be completely segregated – State True or False?

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

Mr. Arvind is bullish on the market but bearish on specific stocks in his portfolio. What strategy should he adopt?

means the maximum exposures in terms of number of options and futures contracts that an investor can hold on one side of the market.

How can you close a short position in a futures market?

In exercising a call option on an index, the option holder receives from the writer an amount equal to excess of spot price over strike price – True or False?

What does hedging do?

A trader sells a futures contract and the price rises. The trader will.

What does a beta of more than 1 mean?

Intrinsic value of an option is the sum of Option premium and Time value – True or False?

Which of these statements is True?

The Intrinsic Value is zero for out-of-the-money options but always positive for in-the-money options – State True or False?

There is higher flexibility in fixing forward contract specification as compared to futures – True or False?

Speculator accepts the risks in search of profits – True or False?

A Clearing Member has to deposit                to clearing corporation which forms part of the security deposit.

Exposure levels of Clearing Members are                correlated with the Liquid Assets maintained with the Clearing Corporation.

When ordinary cash dividends are declared, Call Option values will decrease – True or False?

In Index futures, an open position can be settled by.

The holder of a long position in a PUT option will gain if the price of the underlying asset

When the price of a futures contract increases, the margin account .

A Forward Contract.

Suppose you are a trading member who bought 14 and sold 7 April series index futures contracts. What will be your exposure?

A mutual fund manager is bearish on the market and wishes to reduce its exposure to equities from 50% to 40%, without selling any of his equity holdings. Can he sell index futures for it?

For a derivative exchange, the networth requirement for a clearing member is always less than that for a non-clearing member – State True or False?

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

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

Derivatives brokers/dealers are expected to know their clients and ensure product suitability – State True or False?

Is it true that a buyer of a CALL OPTION cannot lose more than the option premium paid?

Why does ‘Screen based trading’ have an edge over ‘Floor trading’?

Mr. Rohit is a Chartered Accountant and Mr. Ramesh is a Commerce Graduate. Both are clearing members of a recognized exchange. What is TRUE?

What happens to the intrinsic value of a Put Option if the Strike Price is taken down?

Once SEBI approves the bye-laws of a derivative exchange, does the exchange need SEBI’s approval every time it introduces a new futures contract?

If a speculator purchases a naked Call Option, this means he/she has a .

What does ‘Near Month’ futures contract mean?

Rho’ is connected to the.

In connection with the futures market, basis is.

Identify the transaction which is an example of a speculative trade using futures.

Can write an option in the Indian stock market.

The BID PRICE is always.

One reason future trading has become expensive is due to higher margins – True or False?

Who pays the initial margin to the exchange while entering into a futures contract?

Which member of a stock exchange is not a Trading Member itself but clears and settles the trades of Trading Members and institutional clients?

A loss incurred on derivatives transactions on a recognized stock exchange can be carried forward for:

The risks connected with trading in derivatives must be disclosed in:

The Beta of a portfolio is the .

What is the risk of bad delivery in an index futures contract?

When does the monthly series mature for Nifty index futures of NSE?