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

Derivatives Dealers(5)

Q1-A fund manager bullish on the market what should be his course of action ?

1. Buy index future 
2. Sell the index future
3. Sell his entire portfolio
4. None of the above

Q2-Tick size is

1. The minimum daily movement permitted in the price of the contract
2. The minimum permitted price movement during the entire life of the contract
3. The minimum permitted price movement in a futures contract 
4. None of the above

Q3-In the case of future the initial margin is paid only by seller and not by the buyers

1. True
2. False

Q4-If you have sold  june sensex future @4800 , you will make profit only if

1. Future price goes up
2. Future price go down 
3. None of the above

Q5-Generally higher the price volatility , higher would be intial margin requirement

1. True
2. True in africa  
3. True in Japan 
4. False

Q6-A derivative exchange faces

1. Legal risk
2. Operational risk
3. Liquidity risk
4. All of the above

Q7-The risk which is measured by a BETA value is called

1. Unsystematic risk
2. Systematic risk
3. Default risk
4. None of the above

Q8-a investor has done the following two spread trades in sensexfuture contracts what is her profit (+) or loss(-)? bought 10 contract jan-feb@2, sold 10  jan-feb @ 17

1. 1500
2. 7500
3. 375000
4. None of the above

Solution -
purchase price Rs- 2
sale price Rs- 17
Number of contracts- 10
Lot Size - 50
profit = (17-2) * 10 *50= 7500


Q9-At sensex future price level of 3000, what will be the value of one sensex  future contract

1. 3000
2. 300000
3. 150000
4. None of the above

Solution -
Sensex Price - 3000
Lot Size- 50
Value -  3000*50=150000

Q10-Taking position in futures opposite to that in cash market for protecting cash market holding is

1. Hedging
2. Speculating
3. Arbitrage
4. None of the above