Derivatives Dealers 16

Q1. If an option is out of the money and the strike price of the option is lower than the spot
price of the underlying, then we are referring to ____.

• A Put Option
• A Call option
• An European Option
• An American option

Q2. Nifty is at 5200. A put option at 5000 strike price is trading at Rs . 150. What is the
intrinsic value of the option?

• 150
• 200
• 0
• 350

Q3. Which of the following is an exchange traded contract?

• Futures on Nifty
• Forward contract on oil
• A 10 year loan
• An interest rate swap

Q4. All December 2009 stock Futures contracts traded on NSE will expire on :

• 3rd Thursday of December 2009
• Exchanges decides on expiry day and will update the investors on 1st December 2009
• Last Thursday of December 2009
• Last Friday of December 2009

Q5. Nifty is at 3900. What should be the fair price of Nifty futures expiring 180 days from
today. Risk free rate is 8% p.a.

• 4027
• 4083
• 4059
• 4031

Q6. Derivatives help in ____.

• Improving Market Efficiency
• Risk Management
• Price Discovery of the underlying
• All of the above

Q7. An investor is long 2 contracts of Nifty futures purchased at Rs. 5035 each. The next morning a scam is disclosed of a large company because of which markets sell off and Nifty
futures goes down to Rs. 4855. What is the mark to market for the investor? (1 Nifty contract is 50 shares).

• Rs. 18000
• Rs. -9000
• Rs. 9000
• Rs. -18000

Q8. The parties for the Futures contract have the flexibility of closing out the contract prior
to the maturity by squaring off the transactions in the market. State true or false.

• FALSE
• TRUE

Q9. An investor has Unitech shares in her portfolio. RBI is increasing interest rates which is
negative for the stock. She wants to protect the downside in the stock as she feels RBI will
decide on increasing interest rates in the next 3 months. What should she do?

• Buy 2 month put option of Unitech
• Buy 1 month put option of Unitech
• Buy 3 month put option of Unitech
• Buy 3 month call option of Unitech

Q10. An investor sells 3 lots of Nifty futures at Rs. 5231 each. On that day Nifty closes at Rs.
5310 in the futures market. What is the mark to market for the investor if any? One lot of Nifty
is 50 shares

• Profit of Rs. 13000
• Profit of Rs. 11000
• Loss of Rs. 11850
• Loss of Rs. 10000

Derivatives Dealers 15

Q1. Nifty futures is trading at Rs. 3975 and an investor buys a 4000 call for current month
for Rs. 100. What should be the closing price of Nifty only above which the investor starts to
make Profits if he holds his long option position? 1 lot of Nifty = 50 shares.

• 4000
• 4100
• 4075
• 3975

Q2. An investor buys 2 contracts of TCS futures for Rs. 570 each. He sells of one contract at
Rs. 585. TCS futures closes the day at Rs. 550. What is the net payment the investor has to
pay/ receive from his broker? 1 TCS contract = 1000 shares

• Receive Rs. 15000 from the broker
• Pay Rs. 5000 to the broker
• Receive Rs. 5000 from the broker
• Pay Rs. 20000 to the broker

Q3. Nifty futures is trading at Rs. 4955. An investor feels the market will not go beyond
5100. He can ____.

• Sell 5000 Nifty put
• Sell 5100 Nifty put
• Sell 5100 Nifty Call
• Sell 5000 Nifty call

Q4. The maximum expiry for individual stock options contract is :

• 6 months
• 3 months
• 1 months
• 2 months

Q5. SBI is trading at Rs. 1800 in the cash market. What would be the price of SBI futures
expiring three months from today. Risk free rate = 8% p.a.

• 1844
• 1836
• 1895
• 1814

Q6. Security descriptor for stock Futures contract is :

• OPTSTK
• FUTSTK
• OPTIDX
• FUTIDX

Q7. Nifty futures is trading at Rs. 3325 and an investor buys a 3400 call for current month
for Rs. 100. What should be the closing price of Nifty only above which the investor starts to
make Profits if he holds his long option position? 1 lot of Nifty = 50 shares.

• 3400
• 3325
• 3500
• 3425

Q8. Like Futures contracts there is daily settlement of options contracts.

• depends on the expiry
• TRUE
• FALSE
• depends if the option is call or put

Q9. An investor bought a put option on a stock with a strike price Rs. 2000 for Rs. 200. The
option will be in the money when _______.

• The stock price is greater than Rs. 2200
• The stock price is less than Rs. 2000
• The stock price is less than Rs. 1800
• The stock price is greater than Rs. 2000

Q10. The value of a put option is positively related to all of the following EXCEPT:

• exercise price
• risk-free rate
• time to maturity

Derivatives Dealers 14

Q1. An investor buys a 1 lot of Nifty futures at Rs. 4927 and sells it at Rs. 4567 If one
contract is 50 shares what is the Profit/ Loss in the transaction?

• Profit Rs. 18000
• Loss Rs. 22000
• Loss Rs. 18000
• Profit Rs. 22000

Q2. When the strike price is lower than the spot price of the underlying, a call option will be
____.

• At the money
• Out of the money
• In the money
• American Type

Q3. As more and more ____ trades take place, the difference between spot and futures prices
would narrow.

• arbitrage
• delta
• speculative
• hedge

Q4. In a business daily to get information about the top gainers in the futures market, one has
to look in the heading :

• Open Interest
• Positive trend
• Negative trend
• Contract details

Q5. Which of the following is NOT a hedge for a long position in an underlying stock?

• Sell put option
• Sell call option
• Sell futures
• Buy Put option

Q6. TCS is trading at Rs. 420 in the spot market and Rs. 435 in the futures market. Is there
an arbitrage opportunity? The Futures contract is settling today.

• Yes
• Depends on Market Sentiment
• No

Q7. All Stock Options are American in nature.

• FALSE
• TRUE

Q8. On 1st January, SBI is trading at Rs. 2310. An investor is bullish on the company because
of the earnings of last quarter and buys a SBI futures at Rs. 2310. He sells SBI futures at Rs.
2335. What is the Profit / Loss for the investor if 1 lot of SBI is 250 shares?

• Rs. -6250
• Rs. 6250
• Rs. 0
• Rs. -10000

Q9. In India, all Options traded on Nifty are :

• European options
• Asian Options
• American options
• Continental Options

Q10. Reliance is trading at Rs. 1520 in the cash market. What should be the fair price of
Reliance futures expiring 90 days from today. Risk free rate is 8% p.a.

• 1563
• 1529
• 1551
• 1537

Derivatives Dealers 13

Q1.Which of the following cannot be an underlying asset for financial derivative contract?

1. Equity index
2. interest rate
3. commodities 
4. foreign exchange

Q2. in an option contracts, the option lies with the . . . .

1. buyer 
2. seller 
3. both
4. exchange 

Q3. the potential returns on a future positions are 

1. limited 
2. unlimited 
3. a function of the volatility of the index 
4. none of the above

Q4. The maximum brokerage chargeable by trading member in relation to trades effected in the contracts on the f&o segment of the nse  is fixed at . . .  of the contract value, exclusive of satutory levies.

1. 1.5%
2. 2.0%
3. 1%
4. 2.5%

Q5. The best buy order for a given future contracts is the order to buy the index at the . . . . . .

1. highest price
2. lowest price
3. average of the highest and lowest price 
4. none of the above 

Q6. SPAN is a . . . . .based margining  system

1. portfolio 
2. options
3. futures
4. derivatives 

Q7. The regulatory framework for the derivative market in india has been developed by  the . . . .

1. L.C.Gupta committee
2. A.C.Gupta committee
3. J.R.Verma committee 
4. None of the above

Q8. The clearing member has to maintain a minimum liquid networth of . . . .

1. 35 Lakh
2. 80 Lakh
3. 50 Lakh 
4. 20 Lakh

Q9. The daily settlement price for index futures shall be decided by

1. SEBI
2. the Reserve Bank of India
3. the Clearing Corporation / house
4. None of the above

Q10. You bought January Satyam Futures @ Rs 268 and the lot size is 1,200. What is your profit (+)or loss(-) if you sell at Rs 225 ?

1.  -50,600
2. -51,600
3. -52,600
4. None of these

Derivatives Dealers 12

Q1. Liquidity risk can be caused by

1. sale of large number of shares which depress price significantly.
2. high market capitalisation
3. failure of VSAT.
4. low market capitalisation

Q2.The securities which are not delivered in the clearing house during pay-in, are purchased by the clearing house from the market. This process is known as

1. close-out
2. penalty
3. auction
4. upla badla

Q3. Forward contract is a good means of avoiding price risk, but it also entails element of risk because

1. The contract is not standardised
2. The party to the contract may not honour its part of obligation and default.
3. The contract value is fixed
4. None of the above

Q4. The shares of XYZ Ltd are currently quoted at Rs 100. Futures on this share are quoted at Rs 110. In what situation would you buy these futures?

1. You expect the price of the share to move up by 5%
2. You expect the price of the share to move up by 7%
3. You expect the price of the share to move up by 25%
4. You expect the price of the share to move up by 8%

Q5.A trader bought 10 Jan Sensex contracts at the BSE. How will the trader close out this position in the market?

1. Sell 10 Jan sensex contracts
2. Sell 15 Feb. nifty contracts
3. Buy 15 March sensex contracts
4. Buy 15 March nifty contracts

Q6. An Over The Counter option

1. is a standardised contract traded on an Exchange
2. is a contract tailored to suit individual requirements
3. is an option on stocks of pharmaceutical companies
4. can be bought from any option writer

Q7. An investor is bullish on a particular stock, but does not possess liquid cash to buy the scrip.What should he do?

1. buy an index-future
2. wait till he saves enough money
3. do nothing
4. buy an option on the particular stock

Q8. Three Call series of Sesa goa  - March, April and May are quoted. Which will have the lowest Option Premium?

1. April
2. May
3. March
4. All will be equal

Q9. the amount that must  be deposited in the margin account at the time a future contracts is first entered into is known as . . . . .

1. Initial Margin
2. Mark-to-Market
3. Maintenance Margin
4. None of the above

Q10. Index Options, have index as the underlying.

1. True 
2. False 
3. True not in India
4. False not  in india

Derivatives Dealers 11

Q1. Each forward contract

1. can be structured as required by the buyer and seller
2. will have the same specifications
3. specifications are decided by the RBI
4. None of the above .

Q2. A forward contract is an agreement to enter into a contract at a pre-specified future date.

1. True
2. False
3. True only in Europe
4. True only in Africa

Q3. A Call Option gives the Holder the right

1. to buy the underlying asset
2. to sell the underlying asset
3. to either sell or buy the underlying asset, as he wishes
4. None of the above

Q4. Which of the following is true?

1. European options can be exercised anytime before the expiration date
2. European options can be exercised on or before the expiration date
3. European options must be exercised on the expiration date
4. European options can be exercised only on the expiration date

Q5. An European Option

1. can be exercised anytime during the life of the Option
2. can be exercised only at maturity
3. is traded only on the European Exchange
4. is a floating rate option

Q6. The holder of a long position in call option benefits if the price of underlying asset

1. increases
2. decreases
3. does not change
4. can not say

Q7.In an options contract on futures, the underlying asset is a

1. Present contract
2. Past contract
3. Futures contract
4. None of the above.

Q8. The bid is the price at which market maker is prepared

1. to buy.
2. to sell.
3. to remain idle
4. None of the above

Q9. An investor has open position of 10 contract long, 10 contract long and 10 contract short in

sensex future March, April and May series respectively. What are her spreads across

March-April?

1. 0
2. 10
3. 20
4. None of these

Q10. If you have short sold a Sensex future at 3000 and bought it at 3100, what is your gain / loss?

1. A loss of Rs. 5000
2. A gain of Rs. 500
3. A gain of Rs. 5000
4. A loss of Rs. 500

Derivatives Dealers 10

Q1. At the end of each trading day, the Clearing House process of settling your account on a cash basis(funds added to your balance if your position has made a profit, deducted if you sustained a loss) is called:
a) Marking to the market.
b) Performance bond call.
c) Maintenance performance bond call.
d) Initial performance bond call.

Q2. Daily mark-to-market margin payments arise on adverse positions resulting from price movements in futures.
a) True
b) False
c) True only in 2001
d) True only in 2012

Q3. Mark-to-market margins will be collected on a
a) Weekly basis
b) every 2 days
c) every 3 days
d) daily basis

Q4. Who will be eligible for clearing trades in stock futures?
a) All Indian citizens
b) All members of the BSE
c) Only members who are registered with the Derivatives Segment as Clearing Members
d) All of the above

Q5. The daily settlement price for index futures shall be decided by
a) SEBI
b) the Reserve Bank of India
c) the Clearing Corporation / house
d) None of the above

Q6.  An investor has open position of 10 contract long and 20 contract short in sensex future March and April series respectively. What are her open positions in March series after considering the spread position.
a) 0
b) 10
c) 20
d) None of these

Q7. If you have short sold a Sensex future at 3000 and bought it at 3100, what is your gain / loss?
a) A loss of Rs. 5000
b) A gain of Rs. 500
c) A gain of Rs. 5000
d) A loss of Rs. 500

Q8.S&P CNX Nifty is a market- capitalization weighted index
a) True 
b) False
c)none of the above

Q9. Computational methodology followed for construction of stock market indices are
a) Free Float Market Capitalization weighted Index
b) Market Capitalization weighted index
c) Price Weighted Index.
d) True all of them 

Q10. . . . . .  are private agreements between two parties to exchange cash flow in future according to prearranged formula , They can be regarded as portfolio of forward contracts .
a) Swaps 
b) warrants
c) baskets
d) leaps

Derivatives Dealers(9)

Q1.Which of the following is NOT an example of a forward contract?
a) An agreement to buy a car in the future at a specified price.
b) An agreement to buy an airplane ticket at a future date for a certain price
c) An agreement to buy a refrigerator today at the posted price.
d) An agreement to subscribe to a newspaper at a specified price at a future date.

Q2. Futures on individual stocks are allowed
a) on all stocks listed on the stock exchange
b) on few selected stocks only
c) on all stocks listed on all stock exchanges in India
d) on all stocks where price is more than Rs 100 per share

Q3.A rice exporter will be purchasing rice soon. He is afraid that higher prices could wipe out his potential profits. What can the rice exporter do in the futures market to minimize his price uncertainty?
a) He can sell Rice Futures.
b) He should buy Rice Futures
c) He cannot get any help from Futures and Options.
d) He should not get into Rice business.

Q4. An exchange traded futures contract is similar to an OTC (over the counter) derivative. Some common features are :
a) Both are tailored (e.g. non-standardised) instruments
b) Both require margin collection by a clearing house
c) Both are exposed to credit-risk i.e. risk of non-performance by counter party
d) None of the above

Q5. Derivatives are highly leveraged, which implies that
a) You can take a higher position with smaller investments using derivatives
b) You can take a lower position with higher investments using derivatives
c) You can take a higher position if you buy the underlying assets instead of buying derivatives
d) You should buy the underlying assets as you might make more profit on them rather than
derivatives

Q6.All options contracts expire on the .....
a) last friday of the month
b) last Thursday of the month
c) last tuesday of the month
d) none of the above

Q7. On the NSE's NEAT-F&O system, matching of trades takes place at the .....
a) active order price
b) passive order price
c) market price
d) none of the above

Q8. All futures and options contracts expires on the ......
a) last friday of the month
b) last thursday of the month 
c) last tuesday of the month
d) none of the above

Q9.The NEAT -F&o trading system supports an ......
a) order driven market 
b) demand driven market
c) price driven market
d) none of the above

Q10. At any time , the F&O segment of nse provides trading facilities for..... NIFTY futures contracts.
a) two
b) three
c) nine
d) none of the above

Derivatives Dealers(8)

Q1.You bought January Satyam Futures @ Rs 268 and the lot size is 1,200. What is your profit (+)
or loss(-) if you sell at Rs 225 ?
a) -50,600
b) -51,600
c) -52,600
d) None of these

Q2.An investor has buy position in a scrip, he can make his position nil in the settlement by
a) selling any security of equal quantity.
b) selling the same scrip and same quantity.
c) selling any index scrip of equal quantity
d) selling any A-group scrip for equal quantity.

Q3.The futures market has its own terminology. If a trader was long in the market, what would that
mean?
a) The trader sold a future contract
b) The trader bought a futures contract
c) The trader’s open positions exceeded his net worth
d) None of the above

Q4.Forward contracts can be cancelled with any counterparty in the market and not necessarily with the same counterparty with whom it was entered into
a) True
b) False
c) True only in Japan
d) True only in Africa


Q5.Hedgers and speculators strike a balance due to their needs as
a) Hedger has to take risk while speculator has to give up risk
b) Both hedgers and speculators have to take risk
c) Both hedgers and speculators have to give up risk
d) Hedger avoids risk while the speculator takes risk

Q6. If you have bought a Sensex future at 3200 and sold at 3600 what is your profit/loss?
a) loss Rs.18,000
b) gain Rs.20,000
c) gain Rs.18,000
d) loss Rs.20,000

Q7.An investor has open position of 10 contract long, 10 contract long and 10 contract short in sensex future March, April and May series respectively. What are her spreads across March-April?
a) 0
b) 10
c) 20
d) None of these

Q8.Otc derivatives are consider risky because
a)There is no formal house margin system .
b)they dont follow any formal rules .
c)they are not settled on a clearing
d)all of the above 

Q9.An investor has an open position of 10
contracts short and 23 contracts long in March
and April Series respectively. How many contracts
are covered under calendar spread?
a) 23
b) 13
c) 10
d) None of these

Q10. The existence of a derivatives market lends to complete market.
a)True
b)False

Derivatives Dealers(7)

Q1.cash market  is a market with immediate or near immediate delivery

• True
• False
• True in USA
• True Only on Euorope

Q2.Future contracts may or may not be traded on an exchange

• True 
• False
• True only on 2012
• True only 2002 

Q3. a future contracts is very standardized contracts that leaves very little (except the price) open to negotiation.

• True 
• False 
• True only in Mumbai
• True only Delhi

Q4 OTC Derivatives stand for ________.

• Over the Counter Derivatives
• Outstanding Transaction Credit Derivatives
• Options Trade Credit Derivatives
• Commodity price risks

Q5 Under normal circumstances the Futures price trades at a ____ price than the Spot price :

• Higher 
• Lower
• Same price as spot
• Depends on the type of contract

Q6.For stop-loss buy order, the trigger price is ______ the limit price.

• Less than
• Greater than
• Equal to
• None of the above

Q7.A Trading Member can trade __________

• on their own account
• on behalf of their clients
• on behalf of participants
• all of the above

Q8 . Index calculation frequency for NSE NIFTY 50 is _____

• Real Time 
• offline 
• Not mention by NSE

Q9. Currently the tick size in the scrip listed on the exchange is ______

• 5 paisa
• 10 paisa
• .o5 paisa
• none of the above

Q10. Which is not a part of security market

• Commodity
• Real state 
• Equity
• Derivaties

Derivatives Dealers(6)

Q1-In future contracts , the contract maturity period is defined by-

• The exchange 
• by the RBI
• by the parties to the contracts 
• by the government 

Q2-A long or short position in a future contract can be closed easily by initiating a reverse trade.

• True
• False
• True only in Mumbai
• True only in delhi

Q3-A warrant could be understood as

• A derivative instrument
• Akind of equity share
• A kind of debenture 
• A kind of financial bond 

Q4-Use of index future for hedging helps us eliminating the following risk

• Stock specific risk
• All possible risk  
• No risk 
• Market risk

Q5- Systematic risk is an investment risk peculiar to a company which can be reduced by diversifying one's portfolio

• False 
• True 
• True only in africa 
• True only in japan 

Q6- One of the method to control financial risk is to have

• Exposure limits 
• Un-interrupted power supply unit 
• Speculate heavily 
• None of the above

Q7-Credit risk on a derivative transaction includes

• Power outage 
• Riots in the country 
• Credit exposure in the event of default and the probability of a counter party's default.
• Bank strikes

Q8-In case on NSE Index futures, The mpnthly series matures on

• First Thursday of the month 
• Last Thursday of the month 
• First Wednesday of the month 
• Last Wednesday of the month  

Q9-Which of the following can be the underlying in a financial future ?

• Sugar
• T Notes
• Coffee
• Pork bellies 

Q-10-You sold January satyam futures @ Rs 248 and the lot size is 1200. What is your profit or loss If you purchase at Rs 274?

• -30,200
• -31200 
• -32200
• none of the above 

Solution-
Purchase Price : 274
Sales Price: 248
Loss per unit: 26
Lot size : 1200
Loss = (274-248)*1200 = 31200