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