Download I 1) Which of the following is NOT an example of a

PART – I
1) 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.
2) The market price of a product or commodity is:
a) Determined by demand only.
b) Determined by supply only.
c) Influenced by government manipulation.
d) Determined by demand and supply
3) 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
4) If someone is bearish in the market?
a) He expects the market to rise.
b) He expects the market to fall.
c) He expects the market to move sideways.
d) He expects the market to close.
5) 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.
6) The closing index value of the BSE Sensitive Index is calculated using
a) last traded price of the index scripts
b) Weighted average of the last 120 minutes trades of the index scripts
c) The algorithm used to calculate closing Sensex value
d) None of the above
1
7) The value of a derivative instrument
a) Is fixed
b) Depends on the value of an underlying asset
c) Is reset at fixed intervals
d) None of the above
8) 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-standardized) 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
9) Futures contracts can be reversed with any member of the derivatives segment of the exchange.
a) True
b) False
c) Cannot be reversed
d) Cannot be reversed for the next one month
10) Which is the oldest index in India?
a) BSE 30 Sensex
b) BSE 100
c) S&P CNX Nifty
d) BSE 200
11) Taking position in futures opposite to that in cash market for protecting cash market holdings is :
a) Speculating
b) Arbitrage
c) Hedging
d) None of the above.
12) 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
2
13) At the point of entering into the futures contract
a) Both the buyer and the seller pay initial margin to the exchange
b) The buyer alone pays initial margin to the exchange
c) The seller alone pays initial margin to the exchange
d) No margins are payable to the exchange by the buyer or the seller
14) If you have bought a futures contract and the price drops, you will be making a profit.
a) True
b) False
c) Sometimes true
d) Sometimes false
15) Each forward contract
a) Can be structured as required by the buyer and seller
b) Will have the same specifications
c) Specifications are decided by the RBI
d) None of the above
16) Cash market is a market with immediate or near immediate delivery.
a) True
b) False
c) True only in USA
d) True only in Europe
17) On line trading is a system where trading is accomplished through terminals which are connected to
a central computer.
a) True
b) False
c) Sometimes true
d) Partially false
18) In futures contracts, the contract maturity period is defined
a) By the exchange
b) By the RBI
c) By the parties to the contract
d) By the Government
3
19) A forward contract is an agreement to enter into a contract at a pre-specified future date.
a) True
b) False
c) True only in Europe
d) True only in Africa
20) A forward contract is an agreement to buy a certain asset at a certain future date for a price to be
determined in the future.
a) True
b) False
c) True only in Europe
d) True only in Africa
21) If you have a long position in a forward contract and the underlying price falls, you will make a profit.
a) True
b) False
c) True only in Europe
d) True only in Africa
22) The greater the number of participants in any market, generally lower the liquidity.
a) True
b) False
c) True only for the year 2002.
d) True only for the year 2001.
23) In the olden days, the area within the exchange where trading was conducted through open outcry,
was known as the Pit.
a) True
b) False
c) True only for the year 2002.
d) True only for the year 2001.
24) Futures contracts may or may not be traded on an exchange.
a) True
b) False
c) True only for the year 2002.
d) True only for the year 2001.
4
25) If the price of the underlying asset rises sharply after the initiation of a futures contract
a) The long position becomes profitable
b) The long position becomes unprofitable
c) The short position becomes profitable
d) None of the above
26) A fund manager is bullish on the market. What should be his course of action?
a) Buy the index future
b) Sell the index future
c) Sell his entire portfolio
d) None of the above
27) You have purchased shares and sent them for transfer. In the meantime, market is likely to fall due
to some adverse development. What should you do?
a) Do nothing
b) Buy the Index Futures
c) Sell the Index futures
d) None of the above
28) Tick size is
a) The maximum daily movement permitted in the price of the contract
b) The maximum permitted price movement during the entire life of the contract
c) The minimum permitted price movement in a futures contract
d) None of the above
29) A long or short position in a futures contract can be closed easily by initiating a reverse trade.
a) True
b) False
c) True only in Europe
d) True only in Africa
30) You can buy stock futures in India regardless of whether you own the shares or not.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi
5
31) You can buy index futures in India regardless of whether you own the index shares or not.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi
32) A futures contract is a very standardised contract that leaves very little (except the price) open to
negotiation.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi
33) In a futures market a buyer of a contract is obliged to buy the underlying at the contract price from
the clearing house and not to the actual seller.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi
34) In case of futures, the initial margin is paid only by the seller and not the buyer.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi
35) A scarce supply of the actual commodity generally causes futures price to fall.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi
36) If you have sold June Sensex Futures @ 4800, You will make profit if :a) Futures prices go up.
b) Futures prices go down.
c) None of the above
6
37) A warrant could be understood as :
a) A derivative instrument
b) A kind of equity share
c) A kind of debenture
d) A kind of financial bond
38) In November, a trader feels that the interest rates as reflected in futures prices are going to fall in
the next few days. The trader wants to take a spread position based on his view. What action will he
take?
a) Buy near month and sell far month
b) Buy far month and sell near month
c) Buy near month and far month both
d) sell near month and far month both
39) An Indian businessman imports regularly from the US. If he buys dollars in a forward contract, what
is his plan?
a) Creating a hedge
b) Taking risk
c) Speculating on the dollar
d) None of the above
40) Use of Index futures for hedging helps us eliminate the following risk:
a) Stock specific risk
b) All possible risks
c) No risk
d) Market risk
41) If you wanted to create a perfect hedge for your portfolio, the value of index futures you would sell
should equal:
a) Value of your portfolio / Beta of your portfolio
b) Value of your portfolio * Beta of your portfolio
c) Value of your portfolio - Beta of your portfolio * 100
d) Value of your portfolio + Beta of your portfolio *100
42) Generally higher the price volatility, higher would be the initial margin requirement.
a) True
b) False
c) True only in Africa
d) True only in Japan
7
43) Systematic risk is an investment risk peculiar to a company which can be reduced by diversifying
one’s portfolio.
a) True
b) False
c) True only in Africa
d) True only in Japan
44) Credit risk on a derivative transaction includes
a) Power outage
b) Riots in the country
c) Credit exposure in the event of default and the probability of a counter party.s default.
d) Bank strikes
45) A derivative exchange faces
a) Legal risk.
b) Operational risk.
c) Liquidity risk.
d) All of the above
46) Liquidity risk can be caused by
a) Sale of large number of shares which depress price significantly.
b) High market capitalisation
c) Failure of VSAT.
d) Low market capitalisation
47) Operational risks include losses due to
a) Inadequate contingency planning.
b) Limit on gross exposure.
c) Market movement.
d) Strict management control
48) Which of the following kind of loss would you attribute to legal risk?
a) IT department has seized books of accounts of a broker
b) Police department has arrested a broker
c) A contract cannot be enforced because of signature mismatch
d) None of the above
8
49) One of the methods to control financial risk is to have
a) Exposure limits.
b) Un-interrupted power supply unit.
c) Speculate heavily.
d) None of the above
50) When a deal is executed within the two investors of the same broker in his office and then reported
on BOLT, it is called
a) Negotiated deal
b) kerb deal
c) Cross deal
d) All or none deal
51) A typical validity period for a transfer-deed remains
a) 12 months from the stamped date
b) Till next book closure following stamped date.
c) Either 12 months from the stamped date or till next book closure following stamped date whichever is
later.
d) Valid throughout its life irrespective of stamped dates.
52) 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
a) close-out
b) Penalty
c) Auction
d) upla badla
53) Find the odd one out.
a) Bombay Stock Exchange
b) New York Stock Exchange
c) Calcutta Stock Exchange
d) Madras Stock Exchange
54) When no offer for particular scrip is received in an auction or when members who offer the scrip in
auction fail to deliver the same during auction pay-in, the outstanding transaction is
a) Annulled
b) Cancelled
c) closed-out
d) None of the above
9
55) 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.
56) The selection criteria for a scrip to form part of the BSE Sensitive index is
a) The scripts must have been traded every day in the last six months
b) The company must be a dividend paying company
c) Number of trades in the last six months should be greater than a certain number specified by the
Index Committee
d) All of the above
57) 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
58) 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
59) In case of BSE Index futures, the monthly series matures on
a) First Thursday of the month
b) Last Thursday of the month
c) First Wednesday of the month
d) Last Wednesday of the month
60) In which underlying asset, the futures contract cannot be used as a means of acquiring the
underlying assets
a) Foreign currency
b) Gold
c) stock-index
d) None of the above
10
61) Which of the following can be the underlying in a financial future?
a) Sugar
b) T Notes
c) Coffee
d) Pork bellies
62) 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
63) How are prices fixed in case of a forward contract?
a) They are decided at the time of entering into the contract.
b) They are decided at the end of the contract period
c) They are decided and revised from time to time based on market condition
d) None of the above
64) Forward contract is a good means of avoiding price risk, but it also entails element of risk because
a) The contract is not standardised
b) The party to the contract may not honour its part of obligation and default.
c) The contract value is fixed
d) None of the above
65) The risk which is measured by a .Beta. Value is called:
a) Unsystematic Risk
b) Default Risk
c) Systematic Risk
d) None of the above
11
Answers
PART-I
1) An agreement to buy a refrigerator today at the posted price.
2) Determined by demand and supply
3) On few selected stocks only
4) He expects the market to fall.
5) He should buy Rice Futures
6) Algorithm used to calculate closing Sensex value
7) Depends on the value of an underlying asset
8) None of the above
9) True
10) BSE 30 Sensex
11) Hedging
12) You can take a higher position with smaller investments using derivatives
13) Both the buyer and the seller pay initial margin to the exchange
14) False
15) Can be structured as required by the buyer and seller
16) True
17) True
18) By the exchange
19) False
20) False
21) False
22) False
23) True
24) False
25) The long position becomes profitable
26) Buy the index future
27) Sell the Index futures
28) The minimum permitted price movement in a futures contract
29) True
30) True
31) True
32) True
33) True
34) False
35) False
36) Futures prices go down.
37) A derivative instrument
38) Buy near month and sell far month
39) Creating a hedge
40) Market risk
41) Value of your portfolio * Beta of your portfolio
42) True
43) False
44) Credit exposure in the event of default and the probability of a counter party’s default.
12
45) All of the above
46) Sale of large number of shares which depress price significantly.
47) Inadequate contingency planning.
48) A contract cannot be enforced
49) Exposure limits.
50) Cross deal
51) Either 12 months from the stamped date or till next book closure following stamped date whichever
is later.
52) Auction
53) New York Stock Exchange
54) closed-out
55) Selling the same scrip and same quantity.
56) All of the above
57) The trader bought a futures contract
58) False
59) Last Thursday of the month
60) stock-index
61) T Notes
62) Hedger avoids risk while the speculator takes risk
63) They are decided at the time of entering into the contract.
64) The party to the contract may not honour its part of obligation and default.
65) Systematic Risk
13
PART-II
1. Swaps can be regarded as portfolios of ________. [1 Mark]
(a) Future Contracts
(b) Option Contracts
(c) Call Options
(d) Forward Contracts
2. A stock is currently selling at Rs. 165. The put option at Rs. 163 strike price costs Rs.
3. What is the time value of the option? [ 1 Mark ]
(a) Rs. 3
(b) Rs. 2
(c) Rs. 1
(d) Rs. 1.50
3. LEAPS have a maturity of up to _________. [1 Mark]
(a) one year
(b) three years
(c) ten years
(d) three months
4. What is the outstanding position on which initial margin will be levied if no proprietary
trading is done and the details of client trading are: one client buys 500 units @ 1260.
The second client buys 900 units @Rs.1255 and sells 1000 units @Rs.1260?[2 Marks ]
(a) 1900 units
(b) 2400 units
(c) 500 units
(d) 600 units
5. A payer swaption is an option to pay ______ and receive ______. [ 1 Mark ]
(a) Floating, fixed
(b) Interest, interest
(c) fixed, floating
(d) Options, futures
6. Forward contracts are ________ contracts. [ 3 Marks ]
(a) Multilateral
(b) Tri-lateral
(c) Future
(d) Bilateral
14
7. You are the owner of a 5 million portfolio with a beta 1.0. You would like to insure
your portfolio against a fall in the index of magnitude higher than 10%. Spot Nifty
stands at 4000. Put options on the Nifty are available at three strike prices. Which
strike will give you the insurance you want? [2 Marks]
(a) 3,870
(b) 3,840
(c) 3,600
(d) None of the above
8. A receiver swaption is an option to receive ______ and pay ______. [1 Mark]
(a) Fixed, floating
(b) Floating, fixed
(c) Interest, interest
(d) Options, futures
9. The market impact cost on a trade of Rs. 4 million of the S&P CNX Nifty works out to
be about 0.06%. This means that if S&P CNX Nifty is at 4000, a sell order of that value
will go through at a price of Rs. _______. [1 Mark]
(a) 3997.60
(b) 3996
(c) 3,999.50
(d) 3,995.50
10. Ms. Shetty has sold 1000 calls on ABC Ltd. at a strike price of Rs. 885 for a premium
of Rs.27 per call on April 1. The closing price of equity shares of ABC Ltd. is Rs. 890 on
that day. If the call option is assigned against her on that day, what is her net
obligation on April 01? [2 Marks]
(a) Pay-out of Rs.22, 300
(b) Pay-in of Rs.22, 000
(c) Pay-in of Rs.25, 000
(d) Pay-out of Rs.22, 000
11. BANK Nifty is a derivative contract on NSE ____________. True or False? [3 Marks]
(a) True
(b) False
(c) I am not attempting the question
12. CNX IT is a derivatives contract on NSE. True or False? [3 Marks]
(a) True
(b) False
(c) I am not attempting the question
13. Forward contracts on expira tion have to settle by __________. [3 Marks]
(a) Cash
(b) Difference in price
(c) Payment of margin
(d) Delivery of the asset
15
14. On expiry the settlement price of a stock option contract is the _________.[ 2 Marks ]
(a) Closing futures price
(b) Closing stock price
(c) Closing options price
(d) None of the above
15. In an index fund, trading in the stocks comprising the fund, is required in response to
______. [1 Mark]
(a) Favorable company specific news
(b) Poor company specific news
(c) Mergers
(d) Government policies
16. The market impact cost on a trade of Rs. 3 million of the S&P CNX Nifty works out to
be about 0.04%. This means that if S&P CNX Nifty is at 4100, a sell order of that value
will go through at a price of Rs. _______. [1 Mark]
(a) 4098.35
(b) 4096
(c) 4093
(d) 4099.50
17. The following is an example of an order with time condition. [ 3 Marks ]
(a) Day order
(b) Stop Loss
(c) Limit
(d) All of the above
18. What is the outstanding position on which initial margin will be levied if no proprietary
trading is d one and the details of client trading are: one client buys 1000 units @
1260. The second client buys 1000 units @Rs.1255 and sells 1000 units @Rs.1260.?
[ 2 Marks ]
(a) 2000 units
(b) 3000 units
(c) 1000 units
(d) 4000 units
19. The beta of TELCO is 0.8. A person has a long TELCO position of Rs. 800,000 coupled
with a short Nifty position of Rs. 600,000. Which of the following is TRUE? [1 Mark]
(a) He is bearish on Nifty as well as on TELCO
(b) He has a complete hedge against fluctuations of Nifty
(c) He has a partial hedge against fluctuations of Nifty
(d) He is bullish on Nifty as well as on TELCO
16
20. Reliance Industries Ltd. does not have a Beta value. True or False? [2 Marks]
(a) True
(b) False
(c) I am not attempting the question
21. Nifty consists of securities having _____ market capitalization stocks. [ 1 Mark ]
(a) Large
(b) Small
(c) Medium
(d) Large and small
22. The beta of ICICI Bank is 1.5. A person has a long position of Rs. 400,000 of ICICI
Bank. Which of the following gives a complete hedge? [1 Mark]
(a) SELL Rs. 600,000 of Nifty futures
(b) SELL Rs. 650,000 of Nifty futures
(c) SELL Rs. 700,000 of Nifty futures
(d) None of the above
23. On 15th January, Raju bought a January Nifty futures contract which cost him
Rs.334, 500. For this he had to pay an initial margin of Rs.31, 520 to his broker. Each
Nifty futures contract is for delivery of 100 Nifties. On 25th January, the index closed
at 3360. How much profit/loss did he make? [2 Marks]
(a) (-) 1,200
(b) (-) 1,500
(c) (+) 1,200
(d) (+) 1,500
24. Futures have a _______ payo ff. [ 2 Marks ]
(a) Non-linear
(b) Linear
(c) Vertical
(d) Horizontal
25. Mr. A buys a futures contract of M/s. XYZ Ltd. (Lot Size: 1000) expiring on 29th Sep
for Rs. 300. The spot price of the share is Rs. 290. Does he have to pay securities
transaction tax? [ 1 Mark ]
(a) Yes, only if he buys more than 1 contract
(b) Yes
(c) No, only if he sells of the contract immediately
(d) No
17
26. Ms. Shetty has sold 5000 calls on ABC Ltd. at a strike price of Rs. 500 for a premium
of Rs.25 per call on April 1. The closing price of equity shares of ABC Ltd. is Rs. 505 on
that day. If the call option is assigned against her on that day, what is her net
obligation on April 01? [ 2 Marks ]
(a) Pay-out of Rs.1, 22,300
(b) Pay-in of Rs.1, 22,000
(c) Pay-in of Rs.1, 25,000
(d) Pay-out of Rs.1, 00,000
27. An index put option at a strike of Rs. 4200 is selling at a premium of Rs. 30. At what
index level will it break even for the buyer of the option? [1 Mark]
(a) Rs. 4175
(b) Rs. 4176
(c) Rs. 4170
(d) Rs. 4162
28. Which of the following is the duty of the trading member? [ 3 Marks ]
(a) Giving tips to clients to buy and sell
(b) Funding losses of the clients
(c) Collection of adequate margins from the client
(d) All of the above
29. The only way an investor can manage risks in the underlying cash market is by?
[1 Mark]
(a) Hedging in the futures market
(b) Speculating in the futures market
(c) Speculating in the options market
(d) All of the above
30. Nifty is a ________ index [ 2 Marks ]
(a) Well diversified
(b) Poorly diversified
(c) Balanced
(d) volatile
31. You have bought a stock on the exchange. To eliminate the risk arising out of the
stock price, you should _____. [3 Marks]
(a) Buy index futures
(b) Buy stock futures
(c) Sell the stock futures
(d) None of the above
18
32. On 1st January, a three month call option on the Nifty with a strike of 4280 is
available for trading. The `T’ that is used in the Black Scholes formula should be
_______. [1 Mark]
(a) 3
(b) 0.25
(c) 90
(d) None of the above
33. The spot price of ABC Ltd. is Rs. 2000 and the cost of financing is 10%. What is the
fair price of a one month futures contract on ABC Ltd.? [2 Marks]
(a) 2015
(b) 2016.75
(c) 2018.75
(d) 2019
34. Cyrus is short 800 WIPRO July Puts at strike Rs. 1520 for a premium of Rs. 43 each on
July 22. On July 25, (the expiration day of the contract), the spot price of WIPRO
closes at Rs.1553, while the July futures on WIPRO close at 1655. Does Cyrus have an
obligation to the Clearing Corporation on his positions, and how much, if any?
[2 Marks]
(a) Yes. Rs.19, 800 pay-out
(b) No pay in or pay-out on expiration of contract
(c) Yes. Rs.18, 900 pay-out
(d) Yes. Rs.19, 800 pay-in
35. On 15th October, Arvind bought a December Nifty futures contract which cost him Rs.
325,600. For this he had to pay an initial margin of Rs. 30,100 to his broker. Each
Nifty futures contract is for delivery of 100 Nifties. On 27th December, the index
closed at 3280. How much profit/loss did he make? [2 Marks]
(a) (+) 1400
(b) (-) 2400
(c) (+) 2400
(d) (-) 1400
36. Assume that the base value of a market capitalization weighted index were 1000 and
the base market capitalisation were Rs.70,000 crore. If the current market
capitalisation is Rs.140,000 crore, the index is at Rs. ____. [1 Mark]
(a) 2,110
(b) 2,350
(c) 2,250
(d) 2,000
19
37. On 1st January, a one month call option on the Nifty with a strike of 4250 is available
for trading. The `T’ that is used in the Black Scholes formula should be _______.
[ 1 Mark ]
(a) 2
(b) 0.08
(c) 20
(d) None of the above
38. If the annual risk free rate is 9%, then the ‘r' used in the Black Scholes formula should
be ______. [1 Mark]
(a) 0.086
(b) 0.099
(c) 1.1
(d) None of the above
39. The beta of ACC is 1.5. A person has a long TELCO position of Rs. 900,000 coupled
with a short nifty position of Rs. 800,000. Which of the following is TRUE? [1 Mark]
(a) He is bearish on Nifty as well as on ACC
(b) He has a complete hedge against fluctuations of Nifty
(c) He has a partial hedge against fluctuations of Nifty
(d) He is bullish on Nifty as well as on ACC
40. If the annual risk free rate is 8%, then the ‘r' used in the Black Scholes formula should
be ______. [ 1 Mark ]
(a) 0.076
(b) 0.096
(c) 1.1
(d) None of the above
41. Hedging with stock futures means ___________. [ 1 Mark ]
(a) Shorting stocks
(b) Shorting index futures
(c) Shorting stock futures
(d) Long index futures
42. Which of the following is the duty of the trading member? [3 Marks]
(a) Employing large numbers of research analysts
(b) Executing his own orders prior to client orders
(c) Bringing risk factors to the knowledge of client
(d) None of the above
43. On expiry, the settlement price of a Reliance Industries Ltd. futures contract is
_______. [2 Marks]
(a) Opening price of Reliance Industries Ltd.
(b) Closing price of Reliance Industries Ltd.
(c) Closing price of Reliance Industries Ltd. futures contract
(d) Last traded price of Reliance Industries Ltd.
20
44. On 1st January, a two month call option on the Nifty with a strike of 4250 is available
for trading. The `T’ that is used in the Black Scholes formula should be _______.
[1 Mark]
(a) 3
(b) 0.16
(c) 90
(d) None of the above
45. The NEAT F&O trading system _____________. [ 3 Marks ]
(a) Allows spread trades
(b) Allows combination trades
(c) Allows only a single order placement at a time
(d) (a) and (b) above
46. Santosh is bearish about ABC Ltd. and sells 10 one-month ABC Ltd. futures contracts
at Rs.3,96,000. On the last Thursday of the month, ABC Ltd. closes at Rs.410. He
makes a _________. (Assume one lot = 100) [1 Mark]
(a) profit of Rs. 14,000
(b) loss of Rs. 14,000
(c) profit of Rs. 28,000
(d) loss of Rs. 28,000
47. To be eligible for trading a broker must be _________. [1 Mark]
(a) SEBI registered
(b) Highly capitalised
(c) a member of the Association of Trading members
(d) None of the above
48. You are the owner of a 4 million portfolio with a beta 1.0. You would like to insure
your portfolio against a fall in the index of magnitude higher than 12%. Spot Nifty
stands at 4200. Put options on the Nifty are available at three strike prices. Which
strike will give you the insurance you want? [2 Marks]
(a) 3,870
(b) 3,840
(c) 3,696
(d) None of the above
49. A stock is currently selling at Rs. 50. The call option to buy the stock at Rs.45 costs
Rs.9. What is the time value of the option? [1 Mark]
(a) Rs. 9
(b) Rs. 7
(c) Rs. 4
(d) Rs. 2
21
50. An option contract which will not be exercised on the expiry date is ________.
[2 Marks]
(a) An in-the-money option
(b) A deep in-the-money
(c) An out-of-the-money option
(d) None of the above
51. The theoretical futures price is based on the ________. [2 Marks]
(a) Strike price
(b) Underlying spot price
(c) The price at which a futures contract trades in the market
(d) The price set by the exchange
52. On 1st January, a two month call option on the Nifty with a strike of 4000 is available
for trading. The `T’ that is used in the Black Scholes formula should be _______.
[1 Mark]
(a) 2
(b) 0.16
(c) 20
(d) None of the above
53. Stock options on HDFC Bank Ltd. can be exercised ___________. [ 2 Marks ]
(a) Any time on or before maturity
(b) Upon maturity
(c) Any time upto maturity
(d) On a date pre-specified by the trading member
54. Ms. Shetty has sold 1400 calls on HLL at a strike price of Rs.297 for a premium of
Rs.11 per call on April 1. The closing price of equity shares of HLL is Rs. 300 on that
day. If the call option is assigned against her on that day, what is her net obligation on
April 01. [ 2 Marks ]
(a) Pay-out of Rs.12, 300
(b) Pay-in of Rs.12, 000
(c) Pay-in of Rs.11, 000
(d) Pay-out of Rs.11, 200
55. _____________is allowed to clear trades of themselves but not of others. [ 1 Mark ]
(a) Trading member - clearing member
(b) Trading members are not allowed to clear their own trades
(c) Professional clearing member
(d) Self clearing member
56. Index Funds use index futures to reduce _________ [ 2 Marks ]
(a) Tracking error
(b) Expenses
(c) Time to invest in the markets
(d) All of the above
22
57. Weekly options trading commenced on NSE in _______. [1 Mark ]
(a) 02-Jun-2005
(b) 04-Jul-2005
(c) NSE does not trade in Weekly options
(d) 04-Jun-2005
58. The market impact cost on a trade of Rs. 5 million of the S&P CNX Nifty works out to
be about 0.05%. This means that if S&P CNX Nifty is at 4200, a buy order of that
value will go through at a price of Rs. _______. [ 1 Mark ]
(a) 4202.10
(b) 4200
(c) 4210
(d) 4211
59. What is the outstanding position on which initial margin will be levied if no proprietary
trading is done and the details of client trading are: one client buys 2000 units @
1260. The second client buys 2000 units @Rs.1255 and sells 1000 units @Rs.1260.?
[2 Marks]
(a) 4000 units
(b) 5000 units
(c) 3000 units
(d) None of the above
60. In the F&O segment of NSEIL, obligations of client's positions are calculated on a
________ basis. [2 Marks]
(a) Cumulative
(b) Gross
(c) Net
(d) Portfolio
61) Weekly options traded on NSE follow an _______. [1 Mark]
(a) European style settlement
(b) American style settlement
(c) Asian style settlement
(d) Weekly Options are not traded at NSE
62) A stock is currently selling at Rs. 75. The put option to sell the stock at Rs.80 costs Rs. 6. What is the
time value of the option? [1 Mark]
(a) Rs. 1
(b) Rs. 5
(c) Rs. 2
(d) Rs. 4
23
63) Equity Index Options are a form of _________. [1 Mark]
(a) Options on Futures
(b) Basket Options
(c) Swaptions
(d) Warrants
64) Swaption is an option to buy or sell a _______at the expiry of the option
[1 Mark]
(a) Swap
(b) Futures
(c) Basket option
(d) Warrant
65) _________ is one of the uses of Derivatives? [1 Mark]
(a) Forecasting
(b) Risk taking
(c) Arbitrage
(d) All of the above
66) To be eligible for options trading, the ______________ of a stock is taken
into account. [3 Marks]
(a) Price Limit
(b) Trading Member Position Limit
(c) Client Wise Position Limit
(d) Market Wide Position Limit
67) The theoretical futures price is considered for ___________________in case a Futures Contract is
not traded during the day? [2 Marks]
(a) Opening price
(b) Last traded price
(c) Premium settlement
(d) Daily mark to market settlement
24
68) You are the owner of a 4 million portfolio with a beta 1.0. You would like
to insure your portfolio against a fall in the index of magnitude higher
than 15%. Spot Nifty stands at 4200. Put options on the Nifty are
available at three strike prices. Which strike will give you the insurance
you want? [2 Marks]
(a) 4,870
(b) 4,840
(c) 3,570
(d) None of the above
69) 2.50% is the ___________ brokerage chargeable by a trading member in
relation to trades effected in the contracts admitted to dealing on the F&O
segment of NSEIL, exclusive of statutory levies. [1 Mark]
(a) Maximum
(b) Minimum
(c) There is no limit on the brokerage
(d) Fixed
70) Ms. Shetty has sold 800 calls on DR. REDDY'S LAB at a strike price of
Rs.882 for a pre mium of Rs.25 per call on April 1. The closing price of
equity shares of DR. REDDY'S LAB is Rs. 884 on that day. If the call
option is assigned against her on that day, what is her net obligation on
April 01? [2 Marks]
(a) Pay-out of Rs.18, 300
(b) Pay-in of Rs.18, 300
(c) Pay-in of Rs.13, 800
(d) Pay-out of Rs.18, 400
71) T+1 is the basis on which ___________of futures takes place. [2 Marks]
(a) Hedging
(b) Arbitrage
(c) Pricing
(d) Daily Mark to Market settlement
72) The stock symbol, volume and price at which each successive trade occurs
is displayed in the ____________? [3 Marks]
(a) NEAT Trading System Ticker Screen
(b) MBP Screen
(c) Outstanding Orders screen
(d) None of the above
25
73) ‘An unique user ID is assigned to each ________________ in F&O
segment of NSEIL. [3 Marks]
(a) user of the trading member
(b) Director of the trading member
(c) Branch
(d) Exchange
74) An IOC order stands for ______________ [2 Marks]
(a) Interest Order Cancellation
(b) Immediate or Cancel order
(c) Increase Order Cancellation
(d) Immediate or Correct order
75) _________ facility is available on the F&O segment of NSEIL. [3 Marks]
(a) Stock trading facility
(b) Commodity trading
(c) Carry forward
(d) Basket trading facility
76) ____________ is an order which will be cancelled if it is not matched
immediately and in its entirety, in F&O segment of NSEIL. [2 Marks]
(a) MBP order
(b) Immediate or Cancel order
(c) Limit order
(d) Stop Loss
77) Institutional investors world wide are major users of ______. [1 Mark]
a) Stock Futures
b) Stock Options
c) Index Linked derivatives
d) Equity linked derivatives
78) An 'authorised person' in the Futures & Options segment is ___________.
[1 Mark]
a) The client of the broker
b) A clearing member
c) An approved user of a participant
d) All of the above
26
79) All trading member’s positions are monitored on a real time basis by the
________. [1 Mark]
(a) Clearing member only
(b) Trading member only
(c) NSCCL
(d) NSE
80) The option price is the _______. [3 Marks]
a) price paid by the buyer of the option to the seller of the option
b) Paid by the seller of the option to the buyer of the option
c) Sum of intrinsic value plus daily margin of an option
d) All of the above
81) __________ contracts are not settled on exercise date? [2 Marks]
a) In the money option contracts
b) Deep in the money option contracts
c) Both in the money and deep in the money option contracts
d) Out of the money option contracts
82) Which of the following are derivatives? [2 Marks]
a) Stocks
b) Bonds
c) Forward Rate Agreements
d) All of the above
83) To safeguard against potential losses on out-standing positions
___________ is collected. [2 Marks]
a) Premium margin
b) Assignment margin
c) Initial Margin
d) None of the above
84) The seller of a derivative instrument pays ___________. [1 Mark]
a) Wealth
b) Sales Tax
c) Securities Transaction tax
d) Excise duty
27
85) The intrinsic value of a call option is the amount the option is _______.
[1 Mark]
(a) Deep out-of-the-money
(b) at-the-money
(c) out-of-the-money
(d) None of the above
86) 1 is the beta of _______. [2 Marks]
(a) All stocks traded at NSE
(b) Nifty 50
(c) All stocks which are part of Nifty 50
(d) None of the above
87) A stock broker must have a certificate of registration granted by SEBI
before he is allowed to __________. [1 Mark]
(a) Set up his broking firm
(b) Hire employees for his broking firm
(c) Appoint any director in the broking firm
(d) Buy, sell or deal in securities
88) The market impact cost on a trade of Rs. 3 million of the S&P CNX Nifty
works out to be about 0.05%. This means that if S&P CNX Nifty is at
4000, a sell order of that value will go through at a price of Rs. _______.
[1 Mark]
(a) 3998
(b) 3995
(c) 3,999.50
(d) 3,995.50
89) ________can be bought and sold on an exchange like shares. [1 Mark]
(a) ETFs
(b) Index Funds
(c) Fixed deposits
(d) None of the above
28
90) Ms. Shetty has sold 600 calls on WIPRO at a strike price of Rs.1403 for a
premium of Rs.30 per call on April 1. The closing price of equity shares of
WIPRO is Rs. 1453 on that day. If the call option is assigned against her
on that day, what is her net obligation on April 01? [2 Marks]
(a) Pay-out of Rs. 21,600
(b) Pay-in of Rs.15, 000
(c) Pay-out of Rs.13, 400
(d) Pay-in of Rs.12, 000
91) ___________ seeks to measure the amount of value that a portfolio may
stand to lose within a certain time horizon due to potential changes in
underlying asset spot price. [2 Marks]
(a) Black & Scholes model
(b) VaR methodology
(c) Binomial model
(d) Volatility model
92) Mr. A sells a futures contract of M/s. XYZ Ltd. (Lot Size: 1000) expiring on
29th Sep for Rs. 300. The spot price of the share is Rs. 290. He will have
to pay a _________. [1 Mark]
(a) Wealth tax
(b) Sales Tax
(c) Excise Tax
(d) Securities transaction tax
93) An index put option at a strike of Rs.4176 is selling at a premium of Rs.
18. At what index level will it break even for the buyer of the option?
[1 Mark]
(a) Rs. 4194
(b) Rs. 4196
(c) Rs. 4158
(d) Rs. 4162
94) Which of the following is the duty of the trading member? [3 Marks]
(a) Giving tips to clients to buy and sell
(b) Funding losses of the clients
(c) Ensuring timely pay-in and pay-out of funds
(d) All of the above
29
95) Which of the following should be disclosed separately for long and short
positions, in respect of each series of equity index futures as of the
balance sheet date? [1 Mark]
(a) Number of equity index futures contracts having open position
(b) Names of the clients of each trade in the units of equity index futures
(c) Names of the dealers of each trade in the units of equity index futures
(d) All of the above
96) Futures and forwards are similar in the following respect____. [2 Marks]
(a) Settlement of contract takes place in the future
(b) They have settlement guarantee
(c) Positions are marked-to-market everyday
(d) Contracts are custom designed
97) You have bought a stock on the exchange. To eliminate the risk arising
out of the stock price, you should _____. [3 Marks]
(a) Buy index futures
(b) Buy stock futures
(c) Sell stock futures
(d) Buy more stocks
98) MTM settlement stands for _____________. [1 Mark]
(a) Member to Member settlement
(b) Market to Market settlement
(c) Money to Money settlement
(d) Monday to Monday settlement
99) The spot price of ABC Ltd. is Rs. 1000 and the cost of financing is 10%.
What is the fair price of a one month futures contract on ABC Ltd.? [2 Marks]
(a) 1,082.80
(b) 1008.35
(c) 1,085.15
(d) 1,099.40
30
100) Cyrus is short 800 WIPRO July Puts at strike Rs. 1620 for a premium of
Rs. 43 each on July 22. On July 25, (the expiration day of the contract), the
spot price of WIPRO closes at Rs.1653, while the July futures on WIPRO close
at 1655. Does Cyrus have an obligation to the Clearing Corporation on his
positions, and how much, if any? [2 Marks]
(a) Yes. Rs.19, 800 pay-out
(b) No pay in or pay-out on expiration of contract
(c) Yes. Rs.18, 900 pay-out
(d) Yes. Rs.19, 800 pay-in
101) Which of the following is required for personnel working in the industry in
order to dispense quality intermediation? [1 Mark]
(a) To follow certain code of conduct.
(b) To give frequent buy and sell recommendations to clients.
(c) To have good contacts with institutional clients.
(d) All of the above
102) June futures contract on ABC Ltd. closed at Rs. 4153 on May 20 and at
Rs. 4150 on May 21. Raju has a short position of 8000 in the June futures
contract. On May 21, he sells 5000 units of 28-June expiring Put Options on
ABC Ltd. at strike price of Rs.4145 for a premium of Rs.30 per unit. What is
his net obligation to / from the Clearing Corporation for May 21?
[2 Marks]
(a) Pay-in of Rs.1, 32,000
(b) Pay-in of Rs.1, 72,000
(c) Pay-out of Rs.1, 74,000
(d) Pay-out of Rs.1, 32,000
103) Assume that the base value of a market capitalization weighted index
were 1000 and the base market capitalisation were Rs.55, 000 crore. If the
current market capitalisation is Rs.110, 000 crore, the index is at Rs. ____.
[1 Mark]
(a) 2,110
(b) 2,350
(c) 2,250
(d) 2,000
104) TRAHK (Tracks) is a popular ETF based on the _________ . [1 Mark]
(a) Nifty 50 index
(b) S&P 500 Index
(c) Hang Seng index
(d) Dow Jones index
31
105) If the annual risk free rate is 12%, then the ‘r' used in the Black Scholes
formula should be ______. [1 Mark]
(a) 0.1133
(b) 0.1398
(c) 1.1
(d) None of the above
106) At the balance sheet date, the balance in the `initial margin equity index
options account' should be shown separately under the head ________.
[1 Mark]
(a) Prepaid expenses
(b) Current assets
(c) Outstanding balance
(d) Current liabilities
107) Hedging with stock futures means ___________. [1 Mark]
(a) Long security, short security
(b) Long index futures, short index futures
(c) Long security, short stock futures
(d) Long security, long index futures
108) Which of the following is the duty of the trading member? [3 Marks]
(a) Filling of 'Know Your Client' form
(b) Execution of Client Broker Agreement
(c) Bringing risk factors to the knowledge of client
(d) All of the above
109) On expiry, the settlement price of a stock futures contract is _______.
[2 Marks]
(a) Opening price of futures contract
(b) Closing stock price
(c) Closing price of futures contract
(d) Opening stock value
110) The NEAT F&O trading system _____________. [3 Marks]
(a) allows spread trades
(b) does not allow combination trades
(c) allows only a single order placement at a time
(d) None of the above
32
111) Santosh is bearish about ABC Ltd.and sells ten one- month ABC Ltd.
futures contracts at Rs.3,96,000. On the last Thursday of the month, ABC Ltd.
closes at Rs.410. He makes a _________. (assume one lot = 100)
[1 Mark]
(a) Profit of Rs. 7,000
(b) Loss of Rs. 7,000
(c) Profit of Rs. 14,000
(d) Loss of Rs. 14,000
112) The ________________ applies to SEBI for the trading member
registration. [1 Mark]
(a) stock exchange, of which he or she is admitted as a member,
(b) Stock broker
(c) Association of Trading Members
(d) Association of National Trading Members
113) The on-line certification of NSE is known as the ___________. [1 Mark]
(a) National Certification in Financial Management (NCFM)
(b) National Certification in Financial Markets (NCFM)
(c) NSE's Certification in Financial Markets (NCFM)
(d) NSE's Certification in Financial Management (NCFM)
114) In Indian context, trading of derivatives is governed by the regulatory
framework under the _______ [2 Marks]
(a) SC(R) R
(b) SEBI Act
(c) SC(R) A
(d) None of the above
115) The theoretical futures price is ________. [2 Marks]
(a) The price of a contract in the future
(b) Spot price plus cost of carry
(c) The price at which a futures contract trades in the market
(d) The price set by the exchange
116) Stock options on ICICI Bank Ltd. can be exercised ________. [2 Marks]
(a) Any time on or before maturity
(b) Upon maturity
(c) Any time upto maturity
(d) On a date pre-specified by the trading member
33
117) ______________is allowed to only clear trades of others but not trade
themselves. [1 Mark]
(a) Trading member - clearing member
(b) Trading members are not allowed to clear their own trades
(c) Professional clearing member
(d) Self clearing member
118) The initial margin amount is based on ______. [2 Marks]
(a) Black And Scholes calculations
(b) Binomial calculations
(c) VaR calculations
(d) Theoritical pricing calculations
119) A market index is very important for its use ___________. [2 Marks]
(a) As a barometer for market behavior
(b) As an indicator of future stock prices
(c) As an indicator of management quality of companies
(d) All of the above
120) Swaps are a form of __________: [1 Mark]
(a) Derivatives
(b) Stocks
(c) Bonds
(d) None of the above
34
PART – III
1. Assume that the base value of a market capitalization weighted index were 1000 the base
market capitalization were Rs. 35,000 Crore. If the current market capitalization is Rs. 42,000
crore, the index is at.
1. 1200
2. 1110
3. 1250
4. 1350
2. The impact cost on a trade of Rs. 3 million of the fully Nifty works out to be about 0.2%. This
means that if Nifty is at 2000, a buy order will go through at roughly.
1. 2004
2. 2400
3. 2040
4. None of the above
3. The market impact cost on a trade of Rs. 3 million of the full Nifty works out to be abut 0.3%.
This means that if Nifty is at 2000, a sell order will go through at roughly.
1. 1994
2. 2060
3. 2006
4. None of the above.
4. The market impact cost on a trade of Rs. 5 million of the Nifty works out to be about 0.05. This
means that if Nifty is at 2000; A sell order will go through at roughly.
1. 1999
2. 2001
3. 2005
4. 1995
5. The market impact cost on a trade of Rs. 5 million of the Nifty works out to be about 0.005.
This means that if Nifty is at 2000; A sell order will go through at roughly.
1. 1999.90
2. 2000.10
3. 1999
4. 2000.01
6. On 15th January Mr. Arvind sethi bought a January Nifty futures contract which cost him Rs.
269,000 for this he had to pay an initial margin of Rs. 21,520 to his broker. Each Nifty futures contract
is for Delivery of 100 Nifties. On 25th January, the index closed at 2720. How much profit/loss did he
make?
1. +3000
2. -3000
3. -2500
4. +2500
7. A call option at a strike of Rs. 176 is selling at a premium of Rs.18. at what price will it break even
for the buyer of the option?
1. Rs. 196
2. Rs.187
3. Rs.204
4. Rs.194
35
8. An index put option at a strike of Rs.1176 is selling a premium of Rs.36. At what index level will it
Break even for the buyer of the option?
1. Rs.1,870
2. Rs.1,212
3. Rs.1,140
4. Rs.1,940
9. The beta of ORIENTBANK is 0.8. A person has a long position of Rs. 200,000 of ORIENTBANK. Which
of the following gives a complete hedge?
1. Self 200,000 of Nifty
2. Buy 160,000 of Nifty
3. Buy 200,000 of Nifty
4. Sell 160,000 of Nifty.
10) A Speculator hopes that ROLTA is going to rise sharply. He has a long position on the cash market
of Rs. 1 crore on ROLTA. The beta of ROLTA is 1.2. Which of the following position on the index futures
gives him a complete hedge …?
1. Long Nifty Rs. 1 crore
2. Short Nifty Rs. 1.2 crore
3. Short Nifty Rs. 1 crore
4. Long Nifty Rs. 1.2 crore
11) The beta of SBI is 0.8. A person has a LONG SBI position of Rs.200,000 coupled with a short Nifty
position of Rs. 100,000. Which of the following is true?
1. He has a partial hedge against fluctuations of Nifty
2. He is bullish on Nifty and bearish on SBI
3. He has a complete hedge against fluctuations of Nifty
4. This is not a hedge; it is just speculations of Nifty
5. He is bearish on Nifty as well as on SBI
6. He is over hedge.
12) A speculator expects that the rupee will depreciate, and hence profits of PENTSFWARE will rise.
Hence he does LONG PENTSFWARE of Rs. 2 Lakhs. The beta of PENTSFWARE is 1.03. In order to
remove his Nifty EXPOSURE. He does short Nifty to the tune of Rs. 2.5 Lakh which is true.
1. He is over hedge
2. He is completely hedge
3. He is under hedged
4. None of the above
13) Hari buys 2000 shares of HLL at Rs.210 and obtains a complete hedge by shorting 200 Nifties at
2156. He closes out his position at the closing price of the next day, at this point HLL has dropped 2%
and Nifty futures have risen 1%.What is the overall profit / loss of this set of transactions ?
1. Profit of Rs. 6356
2. Profit of Rs.4, 200.
3. Loss of Rs.4088
4. Loss of Rs. 12,712
36
14) The beta of ORIENTBANK is 0.8. A person has a short position of Rs.200,000 of ORIENTBANK .
Which of the following gives a complete hedge?
1. Sell 200,000of Nifty
2. sell 160,000 of Nifty
3. Buy 200,000 of Nifty
4. Buy 160,000 of Nifty
5. Do nothing.
15) The beta of SBI is 0.8. A person has a short SBI position of Rs.200,000 Coupled with a lonmg Nifty
position of Rs. 100,000. Which of the following is true?
1. He has a partial hedge against fluctuations of Nifty
2. He is bullish on Nifty and bearish on SBI
3. He has a complete hedge against fluctuations of Nifty
4. This is not a hedge; it is just speculation
5. He is bearish on Nifty as well as on SBI
6. He is over hedged.
16. A speculator expects that the rupee will appreciate, and hence profits of PENTSFWARE will fall.
Hence he does SHORT PENTSFWARE to the tune of Rs. 2 Lakhs. The beta of PENTSFWARE is 1.03. In
order to remove his Nifty exposure. He does long exposure, he does long Nifty to the tune of Rs. 2.5
Lakh, which of the following is true.
1. He is over hedged
2. He is completely hedged
3. He is under hedged
4. None of the above
17) Hari sells 2000 shares of HLL at Rs.210 and obtain a complete hedge by buying 200 Nifties at
Rs.2156 each. He closes out his position at the closing price of the next day, at this point HLL has risen
2% and Nifty futures have fallen 1%.What is the overall profit / loss of this set of transactions ?
1. 12612
2. 12800
3. -12712
4. 12912
18) The beta of ITC is 1.6 and the total risk of ITC is 9 The daily Nifty is 1.3. One complete hedging is
done, how much risk are we left with?
1. 4.6
2. 5.4
3. 6.0
4. 5.8
19. A portfolio is composed of Rs. 1,000 invested in a securities with beta 1.1 and Rs. 1000 invested in
a Securities with beta 0.8 what is the portfolio beta?
1. 0.85
2. 0.95
3. 0.90
4. 1.0
37
20. A portfolio is composed of Rs. 1,000 invested in a securities with beta 1.2 and Rs. 2000 in a
Securities with beta 0.9 What is the portfolio beta?
1. 1.2
2. 1.1
3. 0.9
4. 1.0
21. On 1st Jan 2001, an investor has a portfolio worth Rs. 2 million which has a beta of 0.5. he needs
Money in middle February as there is a marriage in the family. So he wants to totally remove his
Equity market risk. What is the correct hedging strategy?
1. Short Nifty Futures Rs. 1 Million February expiration
2. Buy Nifty Futures Rs.1 Million February expiration
3. Short Nifty Futures Rs. 1.3 Million, March expiration
4. Bye Nifty Futures Rs. 1.3 Million, March expiration
22. On 1 January 2001, an investor has a portfolio worth Rs. 1 million which has a beta of 1.3, He will
Need money in middle market as there is a marriage in the family. So he sell Rs.2 million of the
Nifty Futures. what has he achieved?
1.
2.
3.
4.
He is partially hedged
He is over hedged ( he has effectively become a speculator betting that Nifty will drop).
He is completely hedged
None of the above.
23. Along position of 10 market lots of Nifty sep futures is purchase 2200 and held till expiry when
the Nifty closes at expiry in September 15th 2248. What would be the profit on this position?
1. 1,148,000
2. 24,000
3. 1,124,000
4. 48,000
24. Babbanseth expects a bumper agricultural harvest. He is highly optimistic about the performance
Of the economy. He hopes the market will go up and buy 10 market lots of the Nifty December
Futures. Nifty December futures trade at 2300. His forecasts come true and he close his position
at
Maturity at 2345. How much profit dose he make?
1. 2,300,000
2. 54,000
3. 2,348,000
4. 480,000
38
25. Ravi expects a sluggish Industrial growth. He is pessimistic about the performance of the
economy. He hopes the market will go down and sells 10 market lots of the Nifty December futures.
Nifty December futures trade at 2300. His forecasts comes true and he closes his position at
Maturity at 2252. How much profit does he make?
1.
2.
3.
4.
1,150,000
48,000
1,174,000
480,000
26. Mohan owns a thousand shares of Reliance. Around budget time, he get uncomfortable with the
Price movements. Which of the following will give him the hedge he desires?
1. Buy 10 Reliance futures contract
2. Buy 5 Reliance futures contract
3. Sell 10 Reliance futures contract
4. Sell 5 Reliance futures contract
27. Santosh is bullish about Reliance and buys ten one- month Reliance futures contracts at
Rs. 2, 96,000. On the last Thursday of the month, Reliance closes at Rs. 271. He makes a-------1. Profit of Rs. 15,000
2. Loss of Rs. 15,000
3. Profit of Rs.25,000
4. Loss of Rs.25,000
28) Rajiv is bearish about ACC and sells twenty one-month ACC futures at Rs. 3, 04,000.
On the 1st Thursday of the month. ACC closes at Rs. 134. He makes a………
1
Profit of Rs. 18000
2.
Loss of Rs. 18000
3.
Profit of Rs.36000
4.
Loss of Rs.36000
29) You are the fund manager with a 1 million portfolio of beta 1.0 you would like to insure
your portfolio against a fall in the index of magnitude higher than 10%, Spot Nifty stands at
2500. Put options on the Nifty are available at three strike prices. Which strike will give him
the insurance he seeks?
1.2240
2. 2250
3. 2260
4. None of the above.
39
30) You own a 1 million portfolio with a beta of 1.0 Current Nifty level is 2500. Three- month
puts at a strike of 2400 available. How many put contracts should you buy for insuring your
portfolio against an index fall below 2400.
1. Four
2. Eight
3. Five
4. Ten
5.
31) You own a 1 million portfolio with a beta of 1.25 Current Nifty level is 2500. Three- month
puts at a strike of 2300 available. How many put contracts should you buy for insuring your
Portfolio against an index fall below 2300.
1. Four
2. Eight
3. Five
4. Ten
32) You own a fund manager managing a 5 million portfolio having a beta of 1. The spot Nifty
stands at 2500. You would like to insure your portfolio against a 10% fall in the index and hence you
buy 25 contracts of Januaty 2250 Nifty puts. Now your portfolio is..
1. Partially insured against a 10% drop in the index.
2. Under insured against a 10% drop in the index.
3. Over insured against a 10% srop in the index.
4. Adequately insured against a 10% srop in the index.
33) You own a fund manager managing a 5 million portfolio having a beta of 1.4 The spot Nifty stands
at 2500. You would like to insure your portfolio against a 10% fall in the index and hence you buy 20
contracts of January 2250 Nifty puts. Now your portfolio is..
1. Partially insured against a 10% drop in the index.
2. Over insured against a 10% drop in the index.
3. Adequately insured against a 10% drop in the index.
34) Anand is bullish about the index. Spot Nifty stands at 2400. He decides to buy one three-month
Nifty call option contract with a strike of 2520 at a premium of Rs. 15 per call. Three month later, the
index closes at 2590. His payoff on the position is..
1. Rs.5500
2. Rs. 12000
3. Rs. 19000
4. None of the above.
40
35) Chetan is bullish about the index. Spot Nifty stands at 2400. He decides to buy one three-month
Nifty call option contract with a strike of 2520 at a premium of Rs. 20 per call. Three month later, the
index closes at 2480. His payoff on the position is..
1. -7000
2. -2000
3. -8000
4. -6000
36) Depak is bullish about the index. Spot Nifty stands at 2600. He decides to sell one three-month
Nifty put option contract with a strike of 2545 at a premium of Rs. 20 per put. Three month later, the
index closes at 2520. His payoff on the position is..
1. Rs.7000
2. RS.-500
3. Rs. 19000
4. None of the above.
37) Anish is bearish about the index. Spot Nifty stands at 2500. He decides to buy one three-month
Nifty put option contract with a strike of 2550 at Rs. 60. Three month later, the index closes at 2450.
His payoff on the position is..
1. Rs.6000
2. Rs. 7500
3. Rs. 4000
4. None of the above.
38. Anant is bearish about the index. Spot Nifty stands at 2500. He decides to buy one three- month
Nifty put option contract with a strike of 2450 at Rs. 10 per put. Three months later the index
closes At 2520. His payoff on the position is.
1. – 1,000
2. – 4,000
3. - 2,650
4. – 12,000
39. You are a speculator. You predict that the market will be volatile in the next three months.
However you have no idea if it will move upwards or downwards. To take advantage of this volatility
you would buy.
1. Three months calls
2. With the same strike
3. A three- month call and a three- month put
4. A three- month calls and sells three months put with the same strike.
40. what is the outstanding position on which initial margin will be calculated if Mr. Madanlal buys
800 Which @1060 and sells 400 units @ 1055?
1. 1250 units
2. 450 units
3. 800 units
4. 400 units
41
41. A Trading member Monojbhai took proprietary positions in a November 2000 expiry contract. He
Bought 3000 trading units at sold 2400 at 1220. The end of day settlement price for November
2000 contract is 1220. If the initial margin per unit for the November 2000 contract is Rs. 100 per
Unit, then the total initial margin payable by Monojbhai would be.
1. Rs. 60,000
2. Rs. 3,00,000
3. Rs.30,000
4. Rs. 5,40,000
42. What will be MTM profit / loss of Mr. Ramesh if he buys 800 @ 1040 and sells 600 @ 1045? The
Settlement price of the day was 1035.
1. - 4000
2. +6000
3. - 6000
4. +2000
43. The May futures contarct on INFOSYSTECH closed at Rs. 3940 yesterday. It closes today at Rs.
3898.60. The spot closes at Rs. 3800. Raju has a short position of 3000 in the May futures contarct. He
sells 2000 units of may expiring pur options on INFOSYSTECH with strike price of Rs 3900 for a
premium of Rs. 110 per unit. What are his net obligations to/from the clearing corporation today?
1) Paying of Rs. 344200
2) Payout of Rs. 640000
3) Payout of Rs. 344200
4) Payin of Rs. 95800
44. A member is short 400 March futures contracts and long 200 April futures contarct. A calender
spread in this case will be
1) Long 200 futures contracts
2) Short 200 futures contracts
3 Long 400 futures contracts
4) Short 4000 futures contracts
45. When the spread between the one-month and two -month futures contarct narrows, you can
profit by:
1) Buying the near-month contract and selling the fair-month one.
2) Selling the near- month contact and buying the far-month one.
3) Both of the above.
4) Non of the above
42
46. In the first week of March, you observe that the spred between the March and April futures
ncontracts has widened. How can you profit from this observation?.
1) By buying March contarct and selling the April one.
2) By Selling March contact and buying the April one.
3) Both of the above.
4) Non of the above
47. A Speculator with a bullish view on a security can
1) Buy stock futures
2) Buy index futures
3) Sell stock futures
4) Sell index futures
48 A bull spread is created by:
1.
2.
3.
4.
Buying a call and a put
Buying two calls
Buying a call and selling a call
Selling two calls
49 A Bear spread is created by:
a.
b.
c.
d.
Sell a call & Buy a call
Sell a call & Buy a put
Sell a put & Buy a call
Buy a call & Sell a put
50 Which of the below listed factors does not affect the price of an option on a stock?
a.
b.
c.
d.
Stock price
Volatility
Dividend
Liquidity of stock in the underlying cash market
51 It is ______ optimal to exercise a call option on a non dividend paying stock.
a.
b.
c.
d.
Sometimes
Never
Always
Rarely
43
52 A put option should always be Exercise ____ if it is sufficiently deep in the money.
a.
b.
c.
d.
Early
As late as possible
At the begging of the training period
At the close of the trading period
53 Initial margin is collected to
a.
b.
c.
d.
Make good losses on the outstanding position
Make good daily losses
Safeguard against potential losses on out standing positions
none of the above
54 The CM / TM is required to disclose to the clearing corporation details of any person or
persons acting in concert who together own _____ percent or more of the open interest of all
futures and options contracts on a particular underlying index on the exchanges:
a.
b.
c.
d.
20
12
15
25
55 The SEBI Committee on derivatives has recommended that the exposure limits for brokers
should be linked to the _____
a.
b.
c.
d.
Daily turnover of the broker
Satisfactory margin payment track record of the broker
Net worth of the broker
Deposits kept by the broker with the exchange / clearing corporation
56. Which of the following is not the duty of the trading member ?
1.
2.
3.
4.
Filling of “Know Your Client form”
Assisting the client to arrange for margin
Bringing risk factors to the knowledge of
Execution of Client Broker of client Agreement
57. The NEAT F&O trading system _____
1.
2.
3.
4.
Allows one to enter combination trades
Does not allow combination trades
Allows only a single order placement at a time
None of the above
44
58 The futures price is _____
5.
6.
7.
8.
The price of a contract in the future
Spot price plus cost of carry
The price at which a future contract trades “In the market”
The price set by the exchange
59. A trading member allowed to clear his own trades only is known as:
1. Trading member-clearing member
2. Trading members are not allowed
3. Professional clearing member
4. Self-clearing member
60. Weekly Options trading commenced on NSE on _____
1.
2.
3.
4.
NSE does not trade in weekly options
02-June-2008
04-July-2005
04-June-2005
61. On NSE’s options market, until the buyer pays in the premium, the premium due is deducted
from the available _____ on a real time basis.
1.
2.
3.
4.
Cash Deposit
Liquid Net Worth
Cash and non-cash deposit
Effective Deposit
63. To be eligible for option trading, the market wide position limit in the stock should not be less
than Rs.____
5.
6.
7.
8.
250 Crore
100 Crore
50 Crore
500 Crore
64.Daily Mark to Market settlement of futures takes place on _____
9.
10.
11.
12.
T+0
T+3
T+5
T+1
45
65. What is displayed in the NEAT Trading System Ticker Screen?
13. The electronic display that continuously shows only the stock symbol, volume and price
at which each successive trade occurs.
14. The Electronic display that continuously shows only the price at which each successive
15. In portfolio management
16. All of the above
66. NSCCL’s on-line position monitoring system monitors open position of ___ a real time basis
17.
18.
19.
20.
Clearing Member only
Trading member only
Clearing member and trading member
Dealer only
67. Futures differ from forwards in the sense that _____
21.
22.
23.
24.
Settlement of contract takes place for the future
Both parties are bound to give/take delivery
Position are marked-to market everyday
Contracts are custom designed
68.Which of the following is required for personal working in the industry in order to dispense
quality Intermediation?
25.
26.
27.
28.
To follow certain code of conduct
To possess requisite skills and knowledge
To have a proper understanding of the business and skills to help it remain competitive
All of the above
69. Which of the following statement is true?
29.
30.
31.
32.
Basket trading is illegal in india
NSE does not allow basket trading in it’s F&O segment
Basket trading has been discontinue in the F&O segment
F&O segment has a Basket trading facility
70. Immediate or cancel is an order which will automatically ____ in F&O segment of NSEIL.
33.
34.
35.
36.
Be matched because it being a preferential order
Be cancelled if it is not matched immediately and it its entirely
Get stored in the system for matching, if not executed immediately
Cancel the unmatched portion of The Order quantity
46
71. The market price of a product or commodity is:
37.
38.
39.
40.
Determined by demand only
Determined by supply only
Influenced by government manipulation
Determined by demand and supply
72. 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.
73. If someone is ‘bearish’ in the market?
a) He expects the market to rise.
b) He expects the market to fall.
c) He expects the market to move sideways.
d) He expects the market to close.
74. The value of derivative instrument
a) Is fixed.
b) Depends on the value of an underlying asset.
c) In reset at fixed internals.
d) None of the above
75. 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 – standardized) 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.
76. Futures contracts can be reversed with any member of the derivatives segment of the exchange.
) True
b) False
c) Cannot be reserved.
d) Cannot be reserved for the next month.
77. Taking position in futures opposite to that in the cash market for protecting cash market
holdings is :a) Speculating
b) Arbitrage
c) Hedging
d) None of the above.
47
78. 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 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.
79. At the point of entering into the future contract.
a) Both the buyer and the seller pay initial margin to the exchange.
b) The buyer alone pays initial margin to the exchange.
c) The seller alone pays initial margin to the exchange.
d) No margin is payable to the exchange by the buyer of the seller.
80. If you have bought a futures contract and the price drops, you will be making a profit.
a) True
b) False
c) Sometimes true
d) Sometimes false
81. Each forward contract
a) Can be instructed as required by the buyer and the seller
b) Will have the same specifications
c) Specifications are decided by the RBI
d) None of the above.
82. Cash market is the market with immediate or near immediate delivery.
a) True
b) False
c) True only in USA.
d) True only in Europe.
83. Online trading is a system where trading is accomplished through terminals which connected to a
central computer.
a) True
b) False
c) Sometimes True
d) Partially false.
84. In futures contracts, the contract maturity is defined
a) By the exchange
b) By the RBI
c) By the parties to the contract.
d) By the government.
48
85. The greater the number of the participants in any market generally lowers the liquidity.
a) True
b) False
c) True only for the year 2002.
d) True only for the year 2001.
86. In the olden days, the area within the exchange where trading was conducted through open outcry
was known as the Pit.
a) True
b) False
c) True only for the year 2002.
d) True only for the year 2001
87. Futures contracts may or nay not be traded on an exchange.
a) True
b) False
c) True only for the year 2002.
d) True only for the year 2001
88. If the price of the underlying asset rises sharply after the initiation of the futures contract.
a) The long position becomes profitable.
b) The long position becomes unprofitable.
c) The short position becomes profitable.
d) None of the above.
89. A fund manager is bullish on the market. What should be his course of action?
a) Buy the index future.
b) Sell the index future.
c) Sell his entire portfolio.
d) None of the above.
90. You have purchased shares and sent them for transfer. In the meantime, market is likely to fall
due to some adverse development. What should you do?
a) Do nothing
b) Buy the index future.
c) Sell the index future.
d) None of the above.
91. Tick size is
a) The maximum daily movement permitted in the price of the contract
b) The maximum permitted price movement during the entire life of the contact.
c) The minimum permitted price movement in the future contract
d) None of the above
49
92. A long or short position for a future contract can be closed easily by initiating a reverse trade.
a) True
b) False
c) True only in Europe
d) True only in Africa.
93. You can buy stock futures in India regardless of whether you own the share or not.
a) True
b) False
c) True only in Mumbai.
d) True only in Delhi
94. You can buy index futures in India regardless of whether you own the index share or not.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi.
95. In a future market a buyer of the contract is obliged to buy the underlying at the contract price
from the clearing house and not to the actual seller.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi.
96. In case of futures, the initial margin is paid only by the seller and not the buyer.
a). True
b). False
c). True only Mumbai
c). True only delhi
97. A warrant could be understood as:
a) A derivative instrument
b) A kind of equity share
c) A kind of debenture
d) A kind of financial bond.
98. Use of index futures for hedging helps us eliminate the following risk:
a) Stock specific risk
b) All possible risks
c) Not risk
d) Market risk
50
99. If you wanted to create a perfect hedge for your portfolio, the value of index futures you would
sell Should equal.
a) Value of your portfolio / Beta of your portfolio
b) Value of your portfolio * Beta of your portfolio
c) Value of your portfolio - Beta of your portfolio *100
d) Value of your portfolio + Beta of your portfolio *100
100. Generally higher the price volatility, higher would be the initial margin requirement.
a) True
b) False
c) True only in Africa
d) True only in japan
101. A derivative exchange faces
a) Legal risk
b) Operational risk
c) Liquidity risk
d) All of the above.
102. One of the methods to control financial risk is to have
a) Exposure limits
b) Un- interrupted power supply unit
c) Speculate heavily
d) None of the above
103. The securities which are not delivered in the clearing house during pay- in, are purchased by the
clearing house from the market. The process is known as.
a) Close- out
b) Penalty
c) Auction
d) Upla badla
104. When no offer for particular scrip is received in an auction or when members who offer the scrip
in auction fail to deliver the same during auction pay-in, the outstanding transaction is
a) Annulled
b) Cancelled
c) Close- out
d) None of the above
105. 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) Sell the same scrip and same quantity
c) Sell any index scrip of equal quantity
d) Sell any A – group scrip for equal quantity
51
106. The future market has is 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 position exceeded his net worth
d) None of the above.
107. Hedgers and speculators Strike a balance due to their needs as
a) Hedger has to take risk while speculator has to vie 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.
108. The risk which is measured by a ‘Beta’ value is called:
a) Unsystematic Risk
b) Default risk
c) Systematic Risk
d) None of the above
109. A stock option is an example of a
a) Commodity
b) Derivative Instrument
c) Money market instrument
d) Foreign Exchange contract
110. Volatility of price of the underlying assets and dividend yield do not affect the option values.
a) True
b) False
c) True only in USA
d) True only in Japan
111. In an in-the-money call option the exercise price would be lower that the market price.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi
112. Intrinsic value of an option cannot be negative.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi
52
113. A long position in a call option may be squared up by taking a long position in a put option with
identical exercised date and exercise price.
a) True
b) False
c) True only in Mumbai
d) True only in Delhi
114 Strike price is the price for which the underlying may be purchased ( in case of a call) or sold (in
case of put) by the option writer upon exercise of the option.
a) True
b) False
c) True only in USA
d) True only in Japan
115. An investor is bullish on a particular stock, but does not possess liquid cash to buy the scrip.
What should he do?
a) Buy an index -- future
b) Wait till he saves enough money
c) Do nothing
d) Buy an option on the particular stock
116. Selling long a stock means
a) Seller dose not own the stock he is supposed to deliver
b) Seller has to deliver the stock after a long time
c) Seller owns the stock he is supposed to deliver
d) Seller has to deliver the stock along with interest.
117) Market makers add
a) Speculation to the market.
b) Liquidity to the market.
c) Fluctuation to the market.
d) Nothing to the market
118) Longer the time to maturity of the call option, lesser be its time value.
a) True
b) False
C) True only in USA
d) True only in japan
119) With decrease in strike price, the premium on call decreases.
a) True
b) False
c) True only in USA
d) True only.
53
120) Buyer of OTM put option is
1) Bullish-payer of premium
2) Bullish-receive of premium
3) Bearish-payer of premium
4) Bearish-receiver of premium
121) Which of the following is true.
a) A spread trading stategy involves taking a position in two or more options of the different tye.
b) A spread trading stategy involves taking a position in two or more options of the same type.
c) A spread trading strategy involves taking a position in one put and five call options of different types.
d) None of the above.
122) Options are
a) Contracts that can be settled in cash or settled by deliver depending on the choice of the seller of the
options.
b) Contracts that can be settled in cash or settled by delivery depending on the choice of the buyer of
the options.
c) Contracts that can be settled in cash or settled by delivery depending on the terms of the contract
as decide by the exchange.
d) None of the above.
133) Time value and intrinsic value together comprise option premium.
a) True
b) False
C) True only in USA
D) True only in Japan
134) Interest rates affects option premium.
a) True
b) False
c) True only in USA
d) True only in Japan
135) The buyer of an option can close no more than the option premium paid.
a) True
b) False
c) True only in USA
d) True only in Japan
136) Exchange traded options are standardized options.
a) True
b) False
c) True only in USA
d) True only in Japan
54
137) Purchaser of a call option has expectation that stock price will.
a) Increase
d) Decrease
c) Remain constant
d) None of the above.
138) In options contract on futures, the underlying asset is a.
a) Present contract
b) Past contract
c) Futures contract
d) None of the above
139) The bid is the price at which market maker is prepared.
a) To buy
b) To sell
c) To remain idle
d) None of the above
140) Exercise prices of options are specified by
a) Government
b) Company
c) Market makers
d) Exchange
141) The purchase of a share in one market and the simultaneous sale in a different market to benefit
from price differentials is known as.
a) Mortgage
b) Arbitrage
c) Garbage
d) Bandage
142) Step margins would ensure the development of a successful market.
a) True
b) False
c) True only in USA
d) True only in Japan
143) If reliance weekly volatility is known then reliance annual volatility is equal to.
a) Weekly volatility X 52
b) Weekly volatility X Sqrt of 52
c) Weekly volatility X 12
d) Weekly volatility X SQRT of 12
55
144) 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.
145) 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 2002
146) Mark-to-market margins will be collected on a :
a) Weekly basis
b) Every 2 days
c) Every 3 days
d) Daily basis
147) 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 segments as clearing members
d) All of the above.
148) A trading member of a derivatives segment must maintain trade confirmation slips and exercise
notice record from the trading system of the Exchange for a period of.
a) 1 Year
b) 2 Years
c) 3 Years
d) 5 Years.
149. The daily settlement price for index shall be decided by
A) SEBI
B) The reserve bank of India
C) The Clearing Corporation / House
D) None of the above
150. The risk associated with trading in derivatives have to laid down in?
a) A verbal agreement with the Client
b) Risk disclosure document
c) Need not to be laid down
d) None of the above
56
151. If the price of a future contract decreases, the margin account of the buyer of futures is debited
for the loss.
a) True
b) False
c) True only in 2001
d) True only is 2002
152. If the trading member exceeds his prescribed position limit,
a) He would be able to only close his own contract.
b) He would be able to open new position
c) All his dealers will be disqualified
d) None of the above
153. Initial margin of the previous day must be paid
a) By the end of the day
b) Before beginning of the next trading day
c) During banking hours next day
d) None of the above
154. Daily mark to market for index futures contract
a) Is calculated on the daily closing price of the index futures
b) Is calculated on the basis of weighted average of the index.
c) Is calculated on the basis of average of last 30 minutes value of the index.
d) None of the above.
155. Separation of trading, settlement, accounting and risk control function
a) Minimizes operation risk at the level of firm.
b) Creates new operation risk
c) Forces people to cheat in the firm
d) None of the above
156. The purpose of initial margin is
a)
b)
c)
d)
To insure futures contract writer against any loss on their position
To account for daily profit or loss on position
To protect the clearing house from a one day adverse price movement on an open position
None of the above
157) The margin requirements for the derivatives segment would be prescribed by
a)
b)
c)
d)
SEBI
The stock Exchange
The RBI
None of the above
57
158) A sub Broker can charge commission from his client under the SEBI ( stock Brokers and Sub
Brokers ) Regulations, 1992.
a)
b)
c)
d)
Not exceeding one and half percent of the value mentioned in the sale or purchase note.
Not exceeding half percent of the value mentioned in the sale or purchase note.
Not exceeding two and half percent of value mentioned in the sale or purchase note.
None of the above.
159) The L.C Gupta committee has recommended that initial margin should be calculated on
a) Gross basis
b) Net basis
c) no basis as margin should be made applicable.
d) 200 % margin should be collected.
160. The L.C Gupta committee recommended that the exchange and SEBI involved in regulation of the
derivatives market.
a) True
b) False
c) True only in 2001
d) True only in 2002
161. In L.C Gupta Committee’s view collection of initial and mark- to market margins by brokers from
their clients should be insisted upon in the case of derivatives trading.
a) True
b) False
c) True only in 2001
d) True only in 2002
162. Margins in futures trading are to be paid by
a) Only the buyer
b) Only the seller
c) Both the buyer and Seller
d) The clearing corporation
163. Which method is used to obtain the volatility estimate?
a) Exponential weighted moving average method
b) Weighted average method
c) Simple average method
d) None of the above
164. Lower margins would induce more players to join market.
a) True
b) False
c) True only in 2001
d) True only in 2002
58
165. Higher margins would result in less number of players wanting to join the market
a) True
b) False
c) True only in 2001
d) True only in 2002
166. Initial margin is set up taking into account the volatility of the underlying market. Generally
higher the volatility, higher is the initial margin.
a) True
b) False
c) True only in 2001
d) True only in 2002
167. The securities contact (regulation) Act 1956 was amended in December 1999 in order to redefine
the definition of securities so as to include.
a) A share as a security
b) Share index as a security
c) Government bond as a security
d) Debenture as a security
168. Brokerage charged to clients must be indicated separately from the price in the contract note.
a) True
b) False
c) True only in 2001
d) True only in 2002
169. In case of the clearing member default, the margin paid by such member on his own account only
would be allowed to be used by the clearing corporation for realizing its own due from the member.
Client’s margins will remain unaffected.
a) True
b) False
c) True only in 2001
d) True only in 2002
170.Clearing corporation on a derivatives exchange should become a legal counterparty to all trades
and be responsible for guaranteeing settlement for all open position.
1.
2.
3.
4.
True
False
True only in 2001
True only in 2002
59
171.Clearing members in derivatives exchange shall make a deposit of Rs. 50 lakhs with the
Exchange / clearing corporation in the form of liquid assets
5.
6.
7.
8.
True
False
True only in 2001
True only in 2002
172. The Clearing Corporation / house has the ower to disable a defaulting clearing member from
trading further
9.
10.
11.
12.
True
False
True only in 2001
True only in 2002
173. Liquid Net worth of clearing members defined as per the J.R. Verma Report as:
13. Liquid assets maintained with the clearing corporation / House less initial margin
applicable
14. Liquid assets maintained with the bankers by the clearing members less current liabilities
15. Working Capital as per the Balance Sheet of the clearing member
16. None of the above
174. Liquid Net worth is always higher than liquid assets maintained by clearing members with the
clearing corporation / House
17.
18.
19.
20.
True
False
True only in 2001
True only in 2002
175. Liquid assets minus initial margin is equal to Liquid Net worth.
21.
22.
23.
24.
True
False
True only in 2001
True only in 2002
176. Calendar spread transactions on index futures carry a high level of risk for the stock
exchange authorities as they attract very low margins
25. True
26. False
60
177. A Professional clearing member:
27.
28.
29.
30.
Is a member on the cash segment of the stock exchange
May or may not be a member on the cash segment of the stock exchange
Should become a member on cash segment of the stock exchange with 3 years
None of the above
178. Value-at-risk is calculated on the basis of:
31.
32.
33.
34.
Historical Volatility
Perfect market prices
Equilibrium market prices
None of the above
179. Each trading member in F&O segment of NSEIL can have
35.
36.
37.
38.
Only two user Ids
Only one user Id
As many users as he wishes
Only three Ids
180. A speculator with a bearish view on a security can
39.
40.
41.
42.
Buy index futures
Buy stock futures
Sell stock futures
Sell index futures
181. Interim exercise settlement takes place for option contract with ___ style exercise
43.
44.
45.
46.
American
African
Asian
European
182.The value of an option _____ with increase in volatility
47.
48.
49.
50.
Decreases
Increases
Does not change
Increase or decrease
61
183. Who undertake clearing and settlement for all executed on the NSE’s F&O segment?
51.
52.
53.
54.
NSE
IISL
NSCCL
SEBI
184.An in-the-money option contract would generate ___ upon exercise for the buyer.
55.
56.
57.
58.
Positive cash flows
Pre-determined amount of cash flow
No cash flow
Negative cash flow
185. A stock can be eligible for derivatives trading, if the non-promoter holding in the
company is at least _____
59.
60.
61.
62.
50%
75%
30%
20%
186.The principal Act, which governs the trading of securities in India, is the _____
63.
64.
65.
66.
The SEBI Act, 1992
The Companies Act, 1956
The Depositories Act, 1996
The Securities contract (Regulations) Act, 1956
187. Var methodology seeks to measure the amount of value that a portfolio may stand to
loss within a certain time horizon due to potential changes in _____
67.
68.
69.
70.
Underlying stock volatility
Underlying index volatility
Underlying asset spot price
Underlying exposures
188. Derivatives first emerged as _____ products
71.
72.
73.
74.
Speculative
Arbitrage
Volatility
Hedging
62
189. The open position of a client in futures and options on an underlying security can not exceed
higher of ___ % of free float market capitalization of ____ of open interest, which ever is higher
75.
76.
77.
78.
10,50
10,5
1,50
1,5
190. The total number of outstanding contract (long/short) at any point in time is called the ___
79.
80.
81.
82.
Volume traded
Open interest
Outstanding
Net positions
191. The SEBI committee on derivative has recommended that every clearing member shall keep such
books of accounts as necessary to show and distinguish –
a) Funds received from and paid to clearing member’s own account
b) Funds received from and paid to each of his client.
c) Funds belonging to the clearing member and clients by maintaining a separate and distinct account.
d) All of the above.
192. Margins are completed on __________
a) Net positions of futures contracts
b) The portfolio of futures and option contracts.
c) Futures and option contracts on each security separately
d) Net sell positions.
193. The basket trading facility enables the generation of _________ files in the derivatives trading
system and its execution in the cash segment of NSEIL.
a) Day order
b) Portfolio Off-line order
c) Limit order.
d) Spread training
194. The short option minimum margin to _________ % of the value of all short index options is levied.
a) 3
b) 5
c) 8
d) 2
195. Which of the following is TRUE about the S & P CNX Nifty?
a) Impact cost can not be calculated
b) Impact cost of the 50 constituent securities is very high
c) Impact cost of the 50 constituent securities is very low.
d) All the 50 constituent have same impact cost.
63
196. In the F & O segment of NSEIL obligations for client positions are calculated ________ basis.
a) Outstanding trades
b) Net
c) Margin
d) Gross
197. An order which is activated when a price crosses a limit is _________ in F & O segment of NSEIL.
a) Market order
b) Fill or fill order.
c) Stop less order.
d) None of the above.
198. Exchange traded derivative contracts on a stock index are generally ____________
a) Not to be settled.
b) Settled by exchange of demat security
c) Settled by exchange of cash difference.
d) Settled by exchange of securities.
199. A put option gives the ________ the right but not the obligation to _________ the underlying asset
at a specified price.
a) Seller, buy
b) Seller, sell
c) Owner, buy
d) Owner, sell
200. NSCCL computers the initial margin percentage for each Nifty index futures contract on a _______
basis.
a) Trade by trade
b) Weekly
c) Fortnightly
d) Monthly.
201. At any point of time _________ Nifty futures contracts are available for trading.
a) Two
b) Five
c) Four
d) Three.
202. Who are the participants in the derivatives market?
a) Hedges
b) Speculators
c) Arbitrageurs
d) All of the above
64
203. In the NEAT F & O system, the hierarchy amongst users comprises of _________
a) Dealer corporate manager, branch manager
b) Corporate Manager, Branch manager, Dealer
c) Branch Manager, Dealer, Corporate manager
d) Corporate Manager, Dealer, branch manager.
204. Which of the following is a customized contract?
a) Forward
b) Warrants
c) Swaptions
d) All of the above
205. You are a Fund Manager managing a portfolio of Rs. 5 million having a beta of 1. The spot nifty
stands at 1250. You would like to insure your portfolio against a 10% fall in the index and hence you buy
15 contracts of January 1125 nifty puts. Now your portfolio is _________
a) Over – insured against a 10% drop in the index
b) Adequately insured against a 10% drop in the index
c) Under insured against a 10% drop in the index
d) Not insured against a 10% drop in the index.
206. Authorized person in the futures & Option segment is ____________
a) Any person who is acting in any capacity on behalf of the trading member of a participant for any
activity related to the trades done and executed.
b) A person authorized by the exchange as an approved used of the trading member.
c) An approved user of a participant.
d) All of the above.
207. If the order is not traded during the day in F & O segment of NSEIL, system cancels the order
automatically at the end of the day, such an order is called a __________
a) Good- till cancelled order
b) Stop –loss order.
C) Day Order.
d) Limit order.
208. Which of the following is true (NSE’s certification in financial Market) ?
a) NSE launched NCFM to test practical knowledge and skills that are required to operate in financial
markets.
b) NSE launched NCFM to certify personnel with a view to improve quality of intermediation.
c) NCFM is an online testing system.
d) All of the above.
209. At the inception of the contract, every client is required to pay ________ to the trading member /
clearing member.
a) Security margin
b) Inception Margin
c) Initial Margin.
d) Guarantee Amount.
65
210. Which of the following users is at the highest level of the hierarchy as far as trading on thr NEAT &
O system is concerned?
a) Corporate Manager
b) Clearing Member
c) Initial Branch Manager
211. Order for which no price is specified at the time order is entered is called ________ order.
a) GTC
b) Limit
c) Stop- loss
d) Market
212. Final settlement of future contracts takes place at closing price of the __________
a) Futures contracts.
b) Expiring contracts.
c) Underlying
d) Near month contract.
213. By buying index futures one can make _________
a) Unlimited profits and losses since market may go up or down
b) Unlimited profits and losses since market any go up or down.
c) Limited profit but unlimited losses.
d) Limited profits or losses.
214. A stock broker means a member of ___________
a) SEBI
b) Any exchange
c) Any stock exchange
d) A recognized stock exchange.
215. Index funds are ___________ Managed
a) Actively
b) Passively
c) Family
d) None of the above
216. In an options contract, the option lies with the –
a) Buyer
b) Both
c) Seller
d) Exchange
217. The best buy order for a given future contract is the order to buy the index at –
a) Highest price
b) Average of the highest and lowest price
c) Lowest price
66
d) None of the above.
218. The best sell order for a given future contract is the order to sell the index at the –
a) Highest price
b) Average of the highest and lowest price
c) Lowest price
d) None of the above.
219. on the NSE’s Neat- F & O system. Matching of trade takes place at the –
a) Active order price
b) Passive order price
c) Market price
d) None of the above.
220. In the case of options, final exercise settlement is _________
a) Sequential
b) Random
c) Automatic
d) Voluntary
221. The market price of the product or commodity is :a) Determined by demand only
b) Determined by supply only
c) Influenced by government manipulation
d) Determined by demand and supply.
222. 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 stocks exchange in India
d) On all stocks where price is more than Rs. 100 per share.
223. Which is the oldest index in India?
a) BSE 30 Sensex
b) BSE 100
c) S & P CNX Nifty
d) BSE 200
224. You have purchased shares and sent them for transfer. In the meantime market is likely to fall due
to some adverse development. What should you do?
a) Do nothing
b) Buy the index futures.
c) Sell the index futures
d) None of the above
67
225. An Indian businessman imports regularly from the US. If he buys dollars in a forward contract, what
is his plan (or) An businessman exports regularly to US , if he sell dollars contract, what is his plan?
a) Creating a hedge
b) Taking risk
c) Speculating on the dollar
d) None of the above
226. Use of Index futures for hedging helps us eliminate the following risk
a) Stock specific risk.
b) All possible risk
c) No risk
d) Market risk
227. Which of the following kind of loss would you attribute to ‘legal’ risk?
a) IT Department has seized books of the account of a broker
b) Police department has arrested a broker
c) A contract cannot be enforced because of signature mismatch
d) None of the above.
228. Operational risk include loses due to
a) Inadequate contingency planning
b) Limit to gross exposure
c) Market movement
d) Strict management control.
229. A typical validity period for a transfer – deed remains
a) 12 months from the stamped date.
b) Till next book closure following stamped date.
c) Either 12 months from the stamped date or till next book closure following stamped date
whichever is later.
d) Valid throughout its life irrespective of stamped dates.
230. 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
a) close-out
b) Penalty
c) Auction
d) Upla badla
68
231. When no offer for particular scrip is received in n auction or when members who offer the scrip in
auction fail to deliver the same during auction.
a) Annulled
b) Cancelled
c) Closed- out
d) None of the above
232. Hedges 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 speculators take risk
233. How are prices fixed in case of a forward contract
a) They are decided at the time of entering into the contract.
b) They are decided at the end of the contract.
c) They are decided and revised from time to time based on market condition
d) None of the above.
234. Which of the following options will yield a profit to the purchaser?
a) An option expired option that is “at the money”
b) A call option when the price of the underlying share increases above the option’s strike price by an
amount greater than the premium paid for the option.
c) A put option when the price of the underlying increases above the options strike price by an amount
greater than the premium paid for the options.
d) An out-of the money option.
235. The strategy of buying a put option on a stock that you posses is called
a) Writing a naked option
b) Writing a covered call
c) Protective put strategy
d) None of the above
236. Strike price is the for which the underlying may be purchased ( in case of a call ) or sold ( in case of
put) by the option writer upon exercise of the option.
a) True
b) False
c) true only in USA
d) True only in Japan
237. In exercising call option on a stock, he option holder acquires long position the underlying from the
option writer (where settlement is effected by delivery)
a) True
b) False
c) true only in USA
d) True only in Japan
69
238. Holders of over the counter option (i.e., those options not traded on any stock exchange)
a) Have to pay mark- market margins only
b) Have to pay mark- market margins once a week.
c) Do not have to pay mark- market margins
d) Have to pay margins only for out-of the money options.
239. Options are
a) Contract that can be settled in cash or settled by delivery depending on the choice of the seller of the
options.
b) Contract that can be settled in cash or settled by delivery depending on the choice of the buyer of the
options.
c) Contract that can be settled in cash or settled by delivery depending on the terms of the contact as
decided by the exchange.
d) None of the above
240. Clearing and settlement process comprise the following activities.
a) Clearing
b) Settlement
c) Risk Management
d) All of the above
241. The clearing mechanism essentially involves
a) Working out open positions
b) Obligation of clearing members
c) Both A & B
d) None of the above.
242. Open position mainly considered for--a) Exposure purpose
b) Daily margin purpose
c) Both A & b
d) None of the above
243. Futures & Options on individual securities can be delivered as in the spot market.
a) True
b) False
244. The most critical component of risk containment mechanism for F & O segment is --a) Margining system
b) Online position monitoring
c) Both A & B
d) None of the above.
245. Which of the following option factor affect the value of option?
a) Underlying market price
b) Strike price
c) Time of expiry
70
d) Intent Rate.
e) Volatility
f) All of the above
246. The future market is a ________ sum game i. e the total number of long in any contract always
_____ the total number of short in any contract.
a) Zero, equal
b) Equal, zero
c) Zero, unequal
d) None of the above
247. The spread/ combination contracts in Near F & O or trade through
a) Spread/ Combination screen
b) Window match screen
c) Ticket window.
d) Previous trade screen
248. The spread/ combination screen allowed the user to input __________ simultaneously in the
market.
a) 4 or 5
b) 2 or 3
c) 1 or 2
d) None of the above
249. A stock can be eligible for derivatives trading, if the non- promoter holding in the company is at
leasta) 50%
b) 75%
c) 30%
d) 20%
250. VAR methodology seeks to measure the amount of value that a portfolio may stand to lose within a
certain time horizon due to potential changes in
a) Underlying stock volatility
b) Underlying Index volatility
c) Underlying asset spot price
d) Underlying exposures.
251. The open position of a client in futures & options on an underlying security can not exceed higher
of _______ % of free float market capitalization or ________ % of open interest , whichever is higher.
a) 10,50
b) 10,5
c) 1,50
d) 1.5
71
252. The SEBI committee on derivatives has recommended that every clearing member shall keep such
books of accounts as necessary to show and distinguish ___________
a) Funds received from and paid to clearing member’s own account
b) Funds received from and paid to each of his client
c) Funds belonging to the clearing members and clients by maintaining a separate and distinct account.
d) All of the above
253. Margins are computed on ___________
a) Net position of futures contracts
b) The portfolio of futures and option contracts
c) Futures and option contracts on each security separately.
d) Net sell positions.
254. The short Option minimum margin equal to ________ % of the value of all short index options is
levied.
a) 3
b) 5
c) 8
d) 2
255. Which of the following is True and the S & P CNX Nifty ?
a) Impact cost can not be calculated
b) Impact cost of the 50 constituent is very high
c) Impact cost of the 50 constituent is very low.
d) All the 50 constituent securities have same impact cost
256. A put option gives the __________ the right but not the obligation to __________ the underlying
asset a specified price.
a) Seller. Buy
b) Seller. Sell
c) Owner, Buy
d) Owner, Sell
257. Which of the following is a customized contract?
a) Forward
b) Warrants
c) Swaptions
d) All of the above
72
258. With elections around the corner, Babbanseth expects the markets to go through a period of high
volatility in the coming three months and would like to take a bet on this volatility, he decides to buy
one market lot of calls and one market lot of puts at a stroke of 1250. The call trades at Rs. 48.00 and
the put trades at Rs. 38.30. if three months later, Nifty closes at 1380, his profit net of costs from the
combination will be Rs. ________
a) 26,000
b) 16,000
c) 13,000
d) 4,370
259. A clearing member of F & O segment of NSEIL id required to have a net worth of Rs __________
crore and keep collateral security deposit os Rs _________ lakh
a) 5,10
b) 5,50
c) 3,100
d) 3,50
260. Which of the following international exchanges does NOT trade derivatives?
a) LIFFE
b) SGX
c) NYSE
d) DTB
261. Which of the following is true about NCFM ( NSE’s Certification in Functional Markets )
a) NSE launched NCFM to certify personnel with a view to improve quality of intermediation.
b) ) NSE launched NCFM to test practical knowledge and skills that are required to operate financial
markets.
c) NCFM is an online testing system
d) All of the above
262. Final settlement of futures contracts takes place at closing price of the ________
a) Futures contract
b) Expiring contract
c) Underlying
d) Near month contract
263. Futures are ___________
a) Linear Payoffs
b) Non Linear Payoffs
264. Options are ____________
a) Linear Payoffs
b) Non Linear Payoffs
73
265. Buying put options is _________ Insurance
a) Buying
b) Selling
c) Buying & Selling
d) Selling & Buying
266. Buying call option is __________ Insurance.
a) Buying
b) Selling
c) Buying & Selling
d) Selling & Buying
267. LEAPS stands for _________
a) Long term equity anticipation securities
b) Long term equity application stocks
268. Warrants are _________
a) Longer dated options
b) Short dated options
269. Swaps are _________
a) Private agreement between two parties
b) For exchange cash flow in future
c) According & pre arrange formula of forward contracting
d) All of the above
270. Current market capitalization equal to ________
a) Sum of current market price out standing shows
b) Sum of (market price X issue size) all securities as on base date.
271. Base market is capitalization equal to________
a) Sum of current market price out standing shows
b) Sum of (market price X issue size) all securities as on base date.
272. Movements of the index should represent the return obtain by _______
a) Typical
b) Non- typical
c) Average
d) None of the above
273. When a client default in making in respect of daily settlement, the contract is _____
a) Not closed out
b) Waiting for someone
c) Closed out
d) None of the above
74
274. When a client default in making payment in respect of daily settlement, the contract is _________
a) M.T.M Margin
b) Assignment Margin
c) From Broker Commission
d) Initial Margin
275. In an options contract, the option lies with the
a) buyer
b) Both
c) Seller
d) Exchange.
75