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