derivative market dmdm

DERIVATIVE INTRODUCTION

Note : NCFM is the Trademark, Registered by NSE

DERIVATIVE INTRODUCTION

Derivative means delivery of the financial product

Main objective of derivative - risk by locking

Derivative first emerged as Hedging product

Exchange traded derivative contracts on stocks or index are settled by exchange

of cash difference.

Derivative Definition

1) A security derived from a Debt Instrument, share, Loan whether secured or un secured, risk instrument or contract for difference or any other form of security.

2) A Contract which Derives its value, from the prices or Index of prices of Underlying security.

Participants in Derivative Market

Hedgers Speculators Arbitrageurs

FUTURES AND OPTIONS TRADING SYSTEM

The future and option trading system of NSE, called NEAT - F & O trading system,

provides national wide online fully automated screen based trading.

Neat System supports an order driven market, order match automatically, on the basis

of security, price, time and quantity.

INDEX ( S&P CNX NIFTY 50 STOCKS)

Index used for the following advantages:-

Barometer of the Market Behavior Nifty is a Bench Mark to ascertain portfolio performance Base (underlying) for Derivative Index (Index Future) Passive Fund Management by Index Funds

(The fund would buy all Index 50 stocks in the proportion, in which they exist in the Nifty)

Good Index Attributes (Characteristics)

Large variety of Different portfolios Taking highly liquid stocks Professionally Maintained stocks

IISL (Indian Index Service & Products Ltd)

IISL provides profession Index Management service to Nifty IISL established by NSE & CRISIL IISL get the Technical Assistance from Standard & Poor.

Impact Cost

Impact cost is measure the liquidity of the market. Any stock qualify to include in Nifty, it has have market impact cost below

0.75%. Any stock to enter in Nifty lower impact cost is the main qualification.

INDEX FUND

This fund would be 50 stocks in the proportion, in which they exist in the Nifty.

ETF ( Exchange Traded Fund )

ETF are Innovative product, First introduced in USA in 1993 - 60% of trading value in American trading volumes in American Stock Exchanges is from ETF.

SPRD (Spider) - S & P 500 Index ETF.QQQ (Cubes) - Nasdaq 100 Index ETFTRAHK (Tracks) - Hong Sing Index ETFNifty BeEs (Nifty Benchmark Exchange Traded Scheme) - S & P CNX Nifty ETF

DIFFERENCE BETWEEN FUTURE MARKET & OPTION MARKET A

future contract buyer give the right but obligation to buy.

A future contract seller give the right but obligation to sell.

Call gives the buyer the right, but not obligation to buy

Put gives to buyer the right, but not obligation to sell

Call gives the seller option premium, but obligation to sell

Put give to seller option premium, but obligation to buy.

Value of option increase, when volatility increase

Value of option decrease, when volatility decrease.

(Buyer = Holder = Owner)

(Seller = Writer)

TYPES OF DERIVATIVES

1) Equity Derivatives (Security Derivatives):-

Index Future Index Option Stock Option Stock Future

2) Financial Derivatives:-

Equity Derivatives Forex currency future Interest rate future

3) Under lying Asset or Derivative:-

Financial Derivatives Commodities Any other Asset

INITIAL MARGINS

At the inception (beginning) of a contract every client is required to pay initial

margin is must to trading number.

Initial margins are charged on Trade by Trade basis

Initial margins charged by NSCCL - clearing member positions upto client level.

Initial margins are charged for the purpose of recover & safe guard against the

worst scenario loss of port folio of an individual client to cover 99% VAR

Worst Scenario loss means, maximum loss under any scenario.

For calculating worst scenario loss of option value “Black- Scholes” Model is

used.

Future value is calculated on cost of carry model.

Initial margins charged on portfolio of future & option contracts

Premium margins are charged client level

Initial margins are debited to Initial margin - EQ Index future account

ASSIGNMENT MARGIN

Assignment Margin is charged in addition to initial margin or premium margin. It paid

on Clearing Member assigned position of option contract on individual securities,

according to the interim and Final exercise settlement.

Assign margins are charged on Clearing Member level

OPEN POSITION CALUCATION

Proprietary open position. 200( total buy) - 400 (total sell)=

Client Open Position:

Client A 400 (total buy - 200 (total sell) = 200 long net position

Client B 200 (total buy) - 400 (total sell) = 200 short net position

Client C 500 (total buy) - 400 (total sell) = 100 long net position =

200 short (Net basis)

(Gross Basis)

500 Long+Short

Trading Member Total Open position = 700 Long + Short

Clearing member open position : All trading member open position and custodial participants open positions.

OPEN INTEREST CALULATION

Open Interest means out standing orders of (Long Position + Short Position) contracts in a particular point of time.

INITIAL MARGINS CHARGED ON F & O MARKET

Index future : 5%Index option : 3%Stock F & O : 7.5%Spread Calendar Margins : 1% Minimum - 3 % Maximum

Note: in option market initial Margin paid by seller Only

EXPOSURE LIMITS IN DERIVATIVE MARKET

For Index Futures & Options

Liquid Net worth x 33 1/3 times = Notional value of gross open position

For stock Futures & Options

Liquid Net worth x 20 times = Notional value of gross open position

For Calendar Spread

For month MTM value (Profit) x 1/3 = open position

SELF DISCLOSING OBLIGATION TO CLEARING CORPORATION

Trading Member

Index future and option

Stock Future and position

Client Level

Index F & O :

Stock F & O :

FIIS & Mutual Funds

Same as Trading Member Rules

: 15% of open position or Rs.500 Croreswhich ever is higher

: 20% of open position or Rs. 500 Croreswhich ever is higher

15% of the open position (not exceeding)

1% of Free float market capitalization or 5% of the Open position

Over all Market wide position limits 20% of Free Float Stock

MARK TO MARKET (MTM) MARGINS

MTM Margin is charged on continuous Basis at the end of each day, on Daily

Basis of cumulative Net out standing open position (Loss).

CM (Clearing Member) are responsible to collect & settle the Daily MTM

Margins (profit/loss) from their Trading Members according to their open

positions.

TM (Trading Member) are responsible to collect & settle the daily MTM

margins for pay in / pay out of their clients according to the clients open

position.

For calculating MTM margin future last ½ hour Average price is takes, if it is not

traded on that day or last half hour MTM is calculated on theoretical price

model.

MTM margin balance at the year end shown in current asset account.

NCFM (NSE’S Certificate in Financial Market)

Nation wide, online & Automatic Exam and Non-Conventional

Conducted by NSE

1. NCFM Develop the practical knowledge 2. Skills to operate the Financial

Market. 3. Improve the quality of Intermediation.

Flexibility in Test Date, Testing Centre, Test time is allowed - Not flexibility a

person.

FUTURE AND OPTION CONTRACT SPECIFICATIONS

Nifty and security F & O Contract value Rs. 2,00,000/- (minimum)

Nifty Lot : 100

Security Lot : 100

S & P CNX Nifty options interval : 10 Points

C NX IT : 10 points Bank Nifty : 10 Points

Security option intervals : 2.5 to 50

Security Rates Intervals ITM-ATM-OTM

Less than or equal Rs. 50 2.5 3 - 1 - 3> 50 Rs. 250 5 3 - 1 - 3> 250 Rs. 500 10 3 - 1 - 3> 500 Rs. 1000 20 3 - 1 - 3> 1000 Rs. 2500 30 3 - 1 - 3> 2500 50 3 - 1 - 3

Nifty Index Levels Strike Interval ITM - ATM - OTMUPTO 2000 25 4 - 1 - 4> 2001 TO 4000 50 4 - 1 - 4> 4001 TO 6000 50 5 - 1 - 5> Above 6000 50 6 - 1 - 6

Nifty future & option daily settlement : Nifty future closing Nifty F & O closing settlement : Nifty closing on expiry date Stocks F & O daily settlement : Security future closing Stocks F & O closing settlement : Security spot closing on expiry date Nifty option style: European (Exercise only on Expiry date) Security option Style : American (Interim Exercise at any time) By Buying or selling future contracts (Index or stock) either profit or loss is

unlimited. At any point of time, 3 Nifty & stock future contracts are available for trading At any point of time Total option contracts available : 42 contracts (3 months x

7 strike prices x 2 options - put & call)

ELIGIBILITY OF ANY EXCHANGE TO ENTER IN DERIVATIVE MARKET

Fulfill the eligibility condition of Dr.LC. Gupta committee (Chairman L.C. Gupta - 24 members - 1998)

Minimum members 50 Forming governing council limited to 40% of Trading members Clearing and settlement takes place in SEBI Approved clearing house Clearing member Net worth Rs. 300 Lakhs Contract value of F & O, not less than 2 Lakhs Maintain initial margin Issuing Risk Disclosure Document for client awareness and “Know Your

customer” rules Passing the NCFM Exam, Dealers & Sales persons.

ELIGIBILITY OF ANY STOCK TO ENTER IN DERIVATIVE MARKET

Non Promoter holding (free float capitalization) not less than Rs. 750 Crores from

last 6 months

Daily Average Trading value not less than 5 Crores in last 6 months

At least 90 % of Trading days in last 6 months

Non Promoter Holding at least 30%

BETA not more than 4 (previous last 6 months)

500 Crores capitalization at the time of listing.

SECURITIES INCLUDE ACCORDING TO SECURITY CONTRACT (REGULATION) ACT 1956

Shares, Scrips, Stocks, Bonds, Debentures and any marketable securities of

incorporated company

Derivatives

Units (any collective investment schemes) - Mutual funds units

Government securities and receipts

Any instrument declared by Central Govt.

Rights or Interest in Securities

Note : But EXIM policy is not a security.

OBJECTIVES OF SEBI ACT 1992

Protect the Interest of Investors

Development the Security Market

Regulating the Security Market

POWERS OF SEBI ACT 1992

Regulate the Business of Stock exchanges

Regulate the working of stock brokers

Prohibit fraudulent and unfair practices

Regulate the self regulatory organizations

Inspect the stock exchanges and mutual fund transactions

Promoting the such functions according to securities contracts (Regulate) Act

1956.

OBJECTIVES OF SECURITIES CONTRACT (REGULATION ACT 1956)

The principle act for governing the trading of securities in India is securities

contract (regulation) Act 1956

Governing means continued supervision of stock exchanges for : -

1. Regulations of Transactions in Securities

2. Contacts in securities

3. Listing of securities in stock exchanges

SEBI AND STOCK EXCHANGE RELATIONS

Every stock exchange must be registered in SEBI

Every stock exchange must be furnished annual reports to SEBI.

PROBLEMS IN CUSTOMIZED (Forward) CONTRACTS

1. Lack of Centralization.

2. Lack of Liquidity

3. Counter party risk problems

Note. 1) Example to customized contract is forward contract.

2) Customized (Forward) contract not trading derivative market.

3) Forward contracts are Bi-lateral contracts.

4) Forward contracts on expiration to settled by Delivery of the Asset.

TYPES OF OPTION CONTRACTS

ITM - In the money contract - Positive cash flowOTM - Out the money contract - Negative cash flowATM - At the money contract - “Zero” cash flow

Intrinsic value - In the money amount of the auctionTime Value - Difference between Premium and Intrinsic value

IN SIDER PERSON (Connected person with company)

Management of the company ( Chairman, MD and Directors)

Merchant Banker, Share Transfer Agent, Registrar, debenture trustee, broker investment advisor, sub broker, auditors.

Relatives of the above connected person. (More than 10% share holders)

Maximum penalty of insider Information Rs. 5 lakhs PRICE SENSITIVE INFORMATION

Financial results

Dividend declaration information.

Issue and buy back information

Major expansion & New projects expansions.

Amalgamation, mergers and take over information.

Disposal of any part of the undertaking.

Policies, Plans & operations of the company.

Note. If any price sensitive information is leaked by an insider person is called inside information.

CLEARING MEMBERS - KEEPING THE BOOKS ( According to the SEBI committee recommendation on derivative market)

1. Fund receive and paid in clearing member account book.

2. Fund received and paid of each client information account book

3. Fund obligations to the clearing member and clients a separate & distinctaccount book.

CLEARING SOFTWARE GENERATE THE FOLLOWING REPORTS

1. Daily obligation statement

2. Daily obligation statement of custodial trades.

3. Final settlement obligation statement .

Note: initial margin report is not generated by clearing software.

NSE - SPAN (Standard portfolio analysis of risk)

The object of NSE -SPAN is to identify over all risk in a portfolio base merging system

of all future and option contracts for each member.

Margining on the NSE’S derivatives market is done using the SPAN margining

system.

The actual margining and position monitoring is done on line, on an intraday

basis using PRISM which is real time.

The SPAN RISK ARRAY represents specific derivative instrument (gain or lose

value) current time to a specific time in the near future.

ADJUSTMENT FOR CORPORATE ACTIONS

Corporate actions can be classified into two types

1. Stock Benefits: Bonus Rights , Merges / Demerges, amalgamations splits,warrants Etc

2. Cash Benefits

The basis for any adjustment for corporate action is such that the value ofthe position for the Market Participants, on the cum and Ex - Dates for the corporate action, shall continues to remind the same as far as possible.

In F & O Segment Any adjustment for corporate actions is carried out on the last day on which a security is traded on a cum basis in the underlying equities market. After the closing of trading hours.

If Dividend above 10% of the market value of share is declare, then only itis added to the future and option market.

Dividend Declare below 10% of the market value of the share is called ordinary dividend, above 10% called Extra - ordinary dividend.

ANNUAL RETURNS

Every Company shall within 60 days from today on which the Annual general meeting is held, prepare are file annual return with registrar of companies.

ANNUAL GENERAL MEETING

The annual general meeting should be held on the earliest of the three relevant dates as prescribed below, with the city (or) town on which the registrar office of the company is situated.

a) 15 months from the previous general meeting. b) Last day of the calendar year. c) 6 months from the close of the financial year.

Annual General Meeting of company may be called by giving at last 21 days notice in writing .

DIVIDEND

Dividend shall be declared or paid by a company for any financial year.

The amount of Dividend shall be deposited in a separate bank account within 5 days from the date of declaration of dividend. The dividend shall be paid within 30 days from the date of its declaration.

SOME IMPORTANT BITS

1. NYSC (New York Stock Exchange) is the American stock exchange but it doesnot trade derivatives.

1. An application for arbitration can be filled within 6 months from the date ofdispute is obligation to client.

2. The daily margin in T+2 rolling settlement comprises of MTM (mark to market)margin & value at risk (VAR) based margin.

3. A client shall make payment for security purchase to the trading member beforethe funds pay - in - day

4. It is a compulsory for a trading member to maintain a separate bank accountfor the client? - Yes.

5. A copy of advertisement has to be submitted by a trading member to NSE forprior approval before its issue in publication / media.

6. Full message window “LIS” indicates - all listing related messages.

7. Stock exchanges does not issue securities in primary market.

8. Which of the following statement/s is TRUE on the NEAT system?a) Disclosed quantity orders cannot be modified to such a quantity where

the disclosed quantity is greater that the order quantity.

b) Expect for the Limited Physical market, a user cannot modify an order toa quantity less than the specified revealer lot and multiple of regular lot.

c) Orders cannot be modified to a quantity greater than the issued capitalfor the security.

Ans:- Statement (A), (B) and (C)

9. Which of the following is not true about Mark to Market Margin?

a) Mark to Market margin is computed on the basis of mark to market loss ofa member.

b) Mark to Market margin is calculated by marking each transaction in a scrip to the closing price of the scrip at the end of trading.

c) Mark to market profit/loss across different securities within the same settlement is set off to determine the mark to market loss for a settlement.

d) Mark to market loss is the notional loss which the member would incur in case the cumulative gross outstanding position of the member in some securities were closed out at the close price of the securities.

Ans:- “d”

10. Which of the following is FALSE about auctions in the NEAT system?

a) All auction orders are entered into the auction order book.

b) Auction order matching takes place at the end of the solicitor period forthe auction.

c) Auction matching takes place only across orders belonging to the sameauction.

d) All auction trades take place at the last traded price for that day in theregular lot book in the normal market.

Ans:- “d”

11. Which of the following statements is FALSE about the NEAT system?a) The order / trade slips are confirmation / modification / cancellation /

rejection slips.

b) Members can take print of confirmation slips at the end of the day from the reprint option in the supplementary menu.

c) Margin report is generated on - line.

d) The trade and order slips are generated on line.

Ans:- “c”

12. which of the following statement/s is TRUE about trade cancellation in theNEAT system.

a) The trade cancellation request is sent to the Exchange for approval and message to that effect is displayed in the message window.

b) When a request for the trade cancellation is approved by the Exchange, the parties to trade receipt system message confirming the trade cancellation and the trade cancellation slip is printed at their respective trader work stations.

c) If the exchange rejects the trade cancellation request, the trade cancellation rejection slip is print at their respective trader workstations.

Ans:- “a,b &c”

13. Which of the following is are TRUE about the ticker in the NEAT system?

a) The user has the option of selecting the securities that should appeat inthe ticker.

b) When a request for the trade cancellation is approved by the Exchange, the parties to trade receipt system message confirming the trade cancellation and the trade cancellation slip is printed at their respective trader workstations.

c) The ticker displays information about any trade in the system as and whenit takes place.

Ans:- “a,b &c”

15) A trading member has the right to enter and exit from the member ship of theexchange.

16) Which country having the highest listing companies

Brazil Italy Mexico * China (Hong Kong) * Japan

Canada * America * India

17) Which Index is Highest - Trade in World Indices.

a) Nifty b) Hong Songc) Nikky d) None of the above.

18) Which of the follwing doesn’t raise mututal funds.

a) IDBI Principle b) Franklin Templeton

c) UTI Units d) NSE / BSE / RBI

19) Which of the following stock has high liquidity ?a) All infotech stocks b) CNX Nifty Juniorc) Nifty Index stocks d) All listed companies

20) Initial Margin Collected on ______________________

a) Up Front Margin b) T + 1

c) T -1 d) End of the Day

1. The basis for any adjustment for corporate action shall be such that

1. The value of the position of the market participants on ex-date is higher that the value of the

position on cum-date

2. The value of the position of the market participant on cum and ex-date for

corporate

action shall continue to remain the same as far

2. In the F&O segment, any adjustment for corporate actions shall be carried out on

1. The first day on which a security is traded on a cum basis in the underlying cash market.

2. The first day on which a security is traded on an ex-dividend basis in the underlying market.

3. the last day in which a security is traded on a cum basis in the underlying cash market.

4. none of the above.

3. You are a speculator. You predict the market will go up in the near future and want to take

advantage of it. You would.

1. Buy Nifty futures 2. Sell securities in the cash market.

3. Sell Nifty futures 4. None of the above.

4. You are a speculator. You predict the market will go down in the near future and want to

take advantage of it. You would :

1. Buy Nifty futures 2. Self securities in the cash market.

3. Sell Nifty futures 4. None of the above

5. When the spread between the one-month and two-month futures contracts narrows, you can

profit by :

1. Buying the near-month contract and Selling 2. Both the above

the fair - month one

3. Selling the near-month contract and buying 4. None of the above

the far-month one

6 In the first week of March, you observe that the spread between the March and April futures

contracts has widened. How can you profit from this observation?.

1. By buying he March contract and Selling2. Both the above

the April one

3. By Selling March contract and buying 4. None of the above

the April one.

7. A speculator with a bullish view on a security can

1. Buy stock futures 2. Sell stock futures

3. Buy index futures 4. Sell index futures.

8. A bull spread is created by

1. Buying a call and a put 3. Buying two calls

2. Buying a call and selling a call 4. Selling two calls

9. A Bear spread is created by

1. Sell a call & Buy a Call 3. Sell a put & Buy a call

2.Sell a call & Buy a put 4. Buy a call & Sell a put

10. Which of the below listed factors does not affect the price of an option on a stock?

1. Stock price 3. Volatility

2. Dividend 4. Liquidity of stock in the underlying cash market

11. It is _________ optimal to exercise a call option on a non-dividend paying stock.

1. Sometimes 3. Always

2. Never 4. Rarely

12. A put option should always be Exercise _____________ if it is sufficiently deep in the

money.

1. early

2. as late as possible

13. Initial margin is collected to

1. make good losses on the outstanding position

2. make good daily losses

3. At the begging of the training period 4.

at the close of the trading period

3. safeguard against potential losses on out standing positions

4. none of the above

14. The sum of _______ percent of the notional value of gross open position in index future as

short index option contract and ____ percent of the notional values of futures and short

option position is stocks shall not exceed liquid net worth.

1. 3,5 3. 8,16

2. 5,3 4. 5,10

15. 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.

1. 20 3. 15

2. 12 4. 25

16. The SEBI Committee on derivatives has recommended that the exposure limits for brokers

should be linked to the _______

1. Daily turnover of the broker

2. Satisfactory margin payment track record of the broker

3. Net worth of the broker

4. Deposits kept by the broker with the exchange/clearing corporation

5. I am not attempting the question

17. Which of the following is not the duty of the trading member?

1. Filling of ‘Know Your Client form

2. Assisting the client to arrange for margin.

3. Bringing risk factors to the knowledge of

4. Execution of Client Broker of client Agreement

18. The Neat F & O trading system ________

1. Allows one to enter combination trades2. does not allow combination trades

3. allows only a single order placement at a time 4. None of the above.

19. The futures price is ________

1. The price of a contract in the future 2. Spot price plus cost of carry

3. the price at which a future contract trades In the market

4. the price set by the exchange

20. A trading member allowed to clear to clear his own trades only is know as

1. Trading member - clearing member 2. Trading member are not allowed

3. Professional clearing member 4. Self-clearing member

21. Weekly options trading commenced on NSE in _________

1. NSE does not trade in Weekly options 2. 02-Jun-2005

3. 04-Jul-2005 4. 04-Jun-2005

22. The value of taxable securities transaction relating to Option in securities is the __

1. The strike price of such option in securities 2. The option premium of such option

3. None of the above in securities

4. aggregate of the strike price and the option Premium of such option in securities.

23. 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. Cash Deposit 2. Liquid Net Worth

3. Cash and non-cash deposit 4. Effective Deposit

24. To be eligible for option trading, the market wide position limit in the stock should not be

less than Rs._________

a. 250 Crore b. 100 Crore

c. 50 Crore d. 500 Crore

25. Daily Mark to Market settlement of futures takes place on _____ basis.

a. (a) T+0 b. T+3

c. T+5 d. T+1

26. What is displayed in the NEAT Trading System Ticker Screen?

(a) The electronic display that continuously shows only the stock symbol,

volume and price at which each successive trade occurs.

b) The Electronic display that continuously shows only the price at which each successive

c. In portfolio management d. All of the above

27. NSCCL’s on-line position monitoring system monitors open position of _____

On a real time basis.

1. Clearing Member only 2. Trading member only

3. Clearing member and trading member4. Dealer Only

28. Futures differ from forwards in the sense that ______.

1. Settlement of contract takes place 2. Both parties are bound to give/take

in the future delivery.

3. position are marked-to-market everyday4. Contracts are custom designed

29. Which of the following is required for personal working in the Industry in order to dispense

quality Intermediation?.

1. To follow certain code of conduct.

3. To have a proper understanding of

the business and skills to help it remain.

competitive

30. Which of the following statement is true ?

1. Basket trading is illegal in India. .

3. Basket trading has been discontinue in the

F&O segment.

2. To possess requisite skills and

knowledge.

4. All of the above.

2. NSE does not allow basket trading

in it’s F&O Segment.

4. F&O Segment has a

Basket trading facility.

31. Immediate or cancel is an order which will automatically ____ in F & O segment of NSEIL.

1. Be matched because it being a preferential order 2. be cancelled if it is not matched

3. Get stored in the system for matching, immediately and in its entirely.

If not executed immediately 4. cancel the unmatched portion of

The Order quantity.

32. The market price of a product or commodity is:

a) Determined by demand only. c)Determined by supply only.

b) Influenced by government manipulation. d)Determined by demand and supply.

33. 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.

34. 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.

35. The value of derivative instrument

a) Is fixed b) Is reset at fixed internals

c) Depends on the value of an underlying asset. d) None of the above.

36. 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 clearinghouse.

c) Both are exposed to credit-risk i.e., risk of non-performance by counter party.

d) None of the above.

37. Futures contracts can be reversed with any member of the derivatives segment of the

exchange.

a) True c) Cannot be reversed

b) Cannot be reversed for the next one month. d) False

38. Taking position in futures opposite to that in cash market for protecting cash market

holdings is :

a) Speculating c) Arbitrage

b) Hedging d) None of the above.

39. 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.

40. 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 playable to the exchange by the buyer of the seller.

41. If you have bought a futures contract and the price drops, you will be making a profit.

a) True c) False

b) Sometimes true d) Sometimes false

42. 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

43. Cash market is a market with immediate or near immediate delivery.

a) True c) False

b) True only in USA d) True only in Europe

44. Online trading is a system where trading is accomplished through terminals which are

connected to a central computer.

a) True c) False

b) Sometimes true d) Partially false

45. In futures contracts, the contract maturity period is defined

a) By the exchange c) By the RBI

b) By the parties to the contract d) By the government.

46. 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.

47. In the olden days, the area within the exchange where trading was conducted through open

outcry was known as the Pit.

a) True c) False

b) True only for the year 2002. d) True only for the year 2001.

48. Futures contracts may or may not be traded on an exchange.

a) True c) False

b) True only for the year 2002. d) True only for the year 2001.

49. 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.

50. A fund manager is bullish on the market. What should be his course of action?

a) Buy the index future c) Sell the index future

b) Sell his entire portfolio d) None of the above.

51. 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 c) Buy the index futures

b) Sell the index futures d) None of the above.

52. 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 future contract


53. A long or short position ion a future contract can be closed easily by initiating a reverse trade.

a) True c) False

b) True only in Europe d) True only in Africa

54. You can buy stock futures in India regardless of whether you own the shares or not.

a) True c) False

b) True only in Mumbai d) True only in Delhi

55. You can buy Index futures in India regardless of whether you own the index share or not.

a) True c) False


56. 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 c) False

b) True only in Mumbai d) True only in Delhi.

57. In case of futures, the initial margin is paid only by the seller and not the buyer.

a) True

b) True only in Mumbai

58. A warrant could be understood as :

a) A derivative instrument

b) A kind of debenture

c) False

d) True only in Delhi.

c) A kind of equity share

d) A kind of financial bond.

59. Use of index futures for hedging helps us eliminate the following risk :

a) Stock specific risk c) All possible risks

b) Not risk d) Market risk

60. 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 portfoli + Beta of your portfolio * 100

61. Generally higher the price volatility, higher would be the initial margin requirement.

a) True c) False

b) True only in Africa d) True only in Japan

62. A derivative exchange faces

a) Legal risk c) Operational risk

b) Liquidity risk. d) All of the above.

63. One of the methods to control financial risk is to have

a) Exposure limits. c)Un-interrupted power supply unit.

b) Speculate heavily. d) None of the above.

64. 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 c) Penalty

b) Auction d) Upla badla

65. 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 c) Cancelled

b) Closed-out d) None of the above.

66. 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

67) 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


68) 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.

69) The risk which is measured by a ‘Beta’ value is called:

a) Unsystematic Risk c) Default risk

b) Systematic Risk d) None of the above.

70) A stock option is an example of a

a) Commodity c) Derivative Instrument

b) Money market instrument d) Foreign Exchange contract

71) Volatility of prices of the underlying assets and dividend yield do not affect the

option values.

a) True c) False

b) True only in USA d) True only in Japan

72) In an in-the-money call option the exercise price would be lower that the market

price.

a) True c) False


73) Intrinsic value of an option cannot be negative.

a) True c) False


74) 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

75 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

76 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 c) Wait till he saves enough money

b) Buy an option on the particular stock d) Do nothing

77 Selling long a stock means

a) Seller does 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.

78 Market makers add

a) Speculation to the market.

b) Liquidity to the market.

c) Fluctuation to the market.

d) Nothing to the market.

79 Longer the time to maturity of the call option, lesser be its time value.

a) True c) False


80 With decrease in strike price, the premium on call decreases.

a) True c) False

b) True only in USA d) True only

81 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

82 which of the following is true.

a) A spread trading strategy involves taking a position in two or more options of the

different type.

b) A spread trading strategy involves taking a position in two or more

option of the same type.

c) A spread trading strategy involves taking a position in one put and five call option of

different types.


83. 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.

84. Time value and intrinsic value together comprise option premium.

a) True

b) True only in USA

85. Interest rates affects option premium.

a) True

c) True only in USA

c) False

d) True only in Japan

b) False

d) True only in Japan

86. The buyer of an option can lose no more than the option premium paid

a) True b) False


87. Exchange traded options are standardized options

a) True c) False


88. Purchaser of a call option has expectation that stock price will

a) Increase c) Decrease

b) Remain constant d) None of the above.

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

a) Present contract b) Past contract

c) Futures contract d) None of the above.

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

a) To buy.

c) To remain idle

91. Exercise prices of options are specified by

a) Government

c) Market makers

b) To sell


b) Company

d) Exchange

92. 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

93. Step margins would ensure the development of a successful market.

a) True c) False


94. 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

95. 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.

96. 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

97. Mark-to-market margins will be collected on a :

a) Weekly basis b) Every 2 days

c) Every 3 days d) Daily basis

99. 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.

100. 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

101. The daily settlement price for Index futures shall be decided by

a) SEBI b) the Reserve Bank of India.

c) The clearing corporation / house d) none of the above.

102) The risk associated with trading in derivatives have to be laid down in?

a) A verbal agreement with the client b) Risk disclosure document

c) Need not be laid down d) None of the above.

103. 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


104. if the trading member exceeds his prescribed position limit,

a) He would be able to only close his own contracts.

b) He would be able to open new positions

c) All his dealers will be disqualified.


105. 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.


106. Daily mark-to-market margin 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 30minutes value of the index.


107. 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.

108. The purpose of initial margin is

a) To insure futures contract writer against any loss on their position.

b) To account for daily profit or loss on position.

c) to protect the clearing house from a one day adverse price movement

on an open position.


109. The margin requirements for the derivatives segment would be prescribed by

a) The SEBI b) The Stock Exchange

c) The RBI d) None of the above.

110. A sub- Broker can charge commission from his client under the SEBI ( Stock

Broker and Sub - Brokers ) Regulations, 1992.

a) Not exceeding one and half percent of the value mentioned in the sale

or purchase

note.

b) Not exceeding half percent of the value mentioned in the sale or purchase note.

c) not exceeding two and half percent of value mentioned in the sale or purchase note

d) none of the above.

111. The L.C. Gupta committee has recommended that initial margin shold be calculated

on

a) gross basis b) net basis

c) no basis as margin should not be made applicable d) 200% margin should be

collected

112. The L.C. Gupta committee recommended that the exchange and SEBI be involved in

regulation of the derivatives market.

a) True b) False


113. In L.C. Gupta Committee’s view, collection of initial and mark-tomarket margins by

brokers from their clients should be insisted upon in the case of derivatives trading.

a) True

c) True only in 2001

114. Margins in futures trading are to be paid by

a) only the buyer

c) both the buyer and seller

b) False

d) true only in 2002

b) only the seller

d) the clearing corporation

115. Which method is used to obtain the volatility estimate?

a) Exponential weighted moving average method.

b) Weighted average method. c) Simple average method


116. Lower margins would induce more players to join the market.

a) True b) False

c) True only in 2001 d) True only 2002

117. Higher margins would result in less number of players wanting to join the market.

a) True b) False


118. 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 c) False

b) True only in 2001 d) True only in 2002

119. 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.

120. Brokerage charged to clients must be indicated separetly from the price in the

contract note.

a) True b) false

c) true only in 2001 d) True only in 2002

121. In case of a 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 dues from the member. Clients margins will remain unaffected.

a) True b) False


122. Clearing corporation on a derivatives exchange should become a legal counterparty to all

trades and be responsible for guaranteering settlement for all open position.

a) True b) False


123. Clearing members in derivatives exchange shall make a deposit of Rs. 50 lakhs with

the Exchange / clearing Corporation in the form of liquid assets.

a) True b) False


124. The clearing corporation / house has the ower to disable a defaulting clearing

member from trading further.

a) True b) False


125. Liquid Net worth of clearing members defined as per the J.R. Verma Report as

a) liquid assets maintained with the clearing corporation / House less

initial margin applicable

b) liquid assets maintained with the bankers by the clearing members less current

liabilities.

c) Working capital as per the Balance sheet of the clearing member


126. Liquid Net worth is always higher than liquid assets maintained by Clearing

members with the clearing corporation / House.

a) True b) False


127. Liquid assets minus Initial margin is equal to Liquid Net worth.

a) True b) False


128. Calendar spread transactions on index futures carry a high level of risk for the stock

exchange authorities as they attract very low margins.

a) True b) False

129. A profession clearing member:

a) Is a member on the cash segment of the stock exchange.

b) may or may not be a member on the cash segment of the stock exchange.

c) Should become a member on cash segment of the stock exchange with 3 years


130. Value-at-risk is calculated on the basis of

a) Historical Volatility b) Perfect market prices.

c) Equilibrium market prices. d) None of the above.

131. Each trading member in F & O segment of NSEIL can have

a) Only tow user Ids c) Only one user ID

b) As many users as he wishes d) Only three Ids

132. A speculator with a bearish view on a security can

a) Buy index futures b) Buy stock futures

c) Sell stock futures d) Sell index futures

133. Interim exercise settlement takes place for option contacts with ___ style exercise

a) American c) African

b) Asian d) European

134. The value of an option ______ with increase in volatility

a) decreases c) increases

b) does not change d) increases or decreases

135. who undertake clearing and settlement for all executed on the NSE’s F & O

segment?

a) NSE c) IISL

b) NSCCL d) SEBI

136. An in-the-money option contract would generate ______ upon exercise for the

buyer

a) positive cash flows

b) pre-determined amount of cash flow

c) no cash flow d) negative cash flow.

137. A stock can be eligible for derivatives trading, if the non-promoter holding in the

company is at least ______

a) 50% b) 75%

c) 30% d) 20%

138. The principal Act, which governs the trading of securities in India, is the ____

a) The SEBI Act, 1992

b) The companies Act, 1956

c) The depositories Act, 1996

d) The securities contracts (Regulations) Act, 1956

139. 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 _____

a) Underlying stock volatility c) Underlying index volatility

b) Underlying asset spot price d) Underlying exposures

140. Derivatives first emerged as _______ products.

a) Speculative c) Arbitrage

b) Volatility d) Hedging

141. 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 open interest,

which ever is higher .

a) 10,50 b) 10,5

b) 1,50 c) 1,5

142. The total number of outstanding contracts (long/short) at any point in time is called

the _______

a) volume traded c) open interest

b) outstanding d) net positions

143. 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.

144. 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

145. 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 c) Portfolio off-line order

b) Limit order d) Spread trading

146. The short option minimum margin equal to ____% of the value of all short index

options is levied.

a) 3 c) 5

b) 8 d) 2

147. 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 50constituent securities have same impact cost

148. In the F & O segment of NSEIL, obligations for client positions are calculated on a

______ basis.

a) outstanding trades c) Net

b) Margin d) Gross

148A. the computation of open position for client trades would be carried out on a

_________ basis

a) outstanding trades b) Net

c) Margin d). Gross (long -short)

149. an order which is activated when a price crosses a limit is _____ in F & O segment

of NSEIL

a) Market order c) Fill or fill order

b) Stop loss order d) None of the above.

150. 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

151. 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

152. 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

153. At any point of time, _______________ Nifty futures contracts are available for

trading

a) two c) five

b) four d) three

154. Who are the participants in the derivatives market ?

a) Hedgers c) Speculators

b) Arbitrageurs d) All of the above

155. 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

156. Which of the following is a customized contract ?

a) Forward c) Warrants

b) Swaptions d) All of the above

157. you are a fund manager managing a portfolio of Rs. 5 Million having a beta of 1.

The spot Nifty stands at 1250. Yo 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.

158. An 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 relating to the trades done and executed.

b. A person authorized by the exchange as an approved user of a trading member.

c. An approved user of a participant.

d. All of the above.

159. if the order is not traded during the day in F & O segment of NSEIL, the 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

160. which of the following is true about NCFM (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.


161. At the inception of a 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

162. Which of the following users is at the highest level of the hierarchy as far as trading

on the NEAT F & O system is concerned ?

a) Corporate manager b) Clearing Member

c) Initial Branch Manager c) Dealers

163. Order for which no price is specified at the time the order is entered is called ____

order

a) GTC c) Limit

b) Stop-loss d) Market

164. Final settlement of future contracts takes place at closing price of the ___

a) futures contract c) Expiring contract

b) Underlying d) Near month contract

165. by buying index futures one can make ______

a) unlimited profits or losses since market may go up or down

b) unlimited profits or losses since market any go up or down

c) limited profit but unlimited losses

d) limited profits or losses

166. a stock broker means a member of ____________

a) SEBI

b) Any stock exchange

167. Index funds are ……………. Managed

1) Actively

2) Passively

3) Family

4) None of the above

c) Any exchange

d) A recognized stock exchange

168. In an options contract, the option lies with the

1) Buyer

2) Both

3) Seller

4) Exchange

169. The best buy order for a given future contract is the order to buy the index at the

1. Highest price

2. Average of the highest and lowest price

3. Lowest price

4. None of the above

170. The best sell order for a given future contract is the order to Sell the index at the

1. Highest price

2. Average of the highest and lowest price

3. Lowest price 4. None of the above

171. On the NSE’s Neat-F&O system, matching of trade takes place at the

1. Active order price 2. Passive order price

3. Market Price 4. None of the above.

172. In the case of options, final exercise settlement is ………..

1. Sequential 2. Random

3.Automatic 4. Voluntary

173. The market price of a product or commodity is :

1. Determined by demand only

2. Determined by supply only.

3. Influenced by government manipulation

4. Determined by demand and supply.

174. Futures on individual stocks are allowed

1. On all stocks listed on the stock exchange

2. On few selected stocks only

3. On all stocks listed on all stocks exchange in India

4. On all stocks where price is more than Rs. 100 per share

175. Which is the oldest index in India?

1.BSE 30 Sensex 2. BSE 100

3. S & P CNX Nifty 4. BSE 200

176. 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

177. An Indian businessman imports regularly from the US. If he buys dollars in a

forward contract, what is his plan (or) An Indian businessman exports regularly

to US if he sell dollars in a forwarded contract, what is his plan

a) Creating a hedge b) Taking risk

c) Speculating on the dollar d) None of the above

178. 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

179. Which of the following kind of loss would you attribute to ‘legal’ risk?

a) IT Department has seized books of account of a broker

b) Police department has arrested a broker

c) A contract cannot be enforced because of signature mismatch


180. Operational risk include loses due to

a) Inadequate contingency planning b) Limit to gross exposure.

c) Market movement. d) Strict management control

181. 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.

182. 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

183. When no offer for a 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

184. 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 takes risk

185. 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


186. Which of the following options will yield a profit to the purchaser?

a) An 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

option’s strike price by an amount greater than the premium paid for the options.

d) An out-of-the-money option

187. 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

188. 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


189. In exercising call option on a stock, the option holder acquires long position ion

the underlying from the option writer (where settlement is effected by delivery)

a) True b) False

c) The only in USA d) True only in Japan

190. Holders of Over The Counter Option (i.e., those options not traded on any stock

exchange)

a) Have to pay mark-to-market margins daily

b) Have to pay mark-to-market margins once a week

c) Do not have to pay mark-to-market margins

d) Have to pay margins only for out-of the-money options

191. The purchase of a share in one market and the simulataneous sale in a different

market to benefit from price differentials is known as

a) Mortgage b) Arbitrage

c) Garbage d) Bandage

192. If a trading member exceeds his prescribed position limit

a) He would be able to only close his own contracts

b) He would be able to open new positions

c) All his dealers will be disqualified

d) None of the above

193. In case of a clearing member default, the margin paid by such member on

his9own account only would be allowed to be used by the clearing corporation

for

realizing its own dues from the member clients margins will remain unaffected.

a) True c) False

b) True only in 2001 d) True only in 2002

194. You are a trading Member. One of you clients a has purchased 10 contracts (50

units each) of December series index futures and another clients B has sold 15

contracts of January series index futures. Your exposure will be

a) Grossed up at 25 contracts b) Netted out at 5 contracts

c) Grossed up at 5 Contracts d) None of the above.

195. According to the J.R. Varma Committee Recommendations. The Margining for

the derivatives is based on :

a. Profit-at-risk method b. Volume-at-risk method

c. Value-at-risk method d. Variable-at-risk method

196. for the derivatives exchange, the trading member’s net-worth shall be fixed by

a) SEBI b) The Stock exchange

c) SCRA d) The clearing member

197. On which of the following can you have a futures contract?

a) Share-Index b) Commodities

c) Currency d) All of the above

198. If the price of the underlying asset rises sharply after the initiation of a futures

contract:

a. The value of a long position in the futures contract becomes positive

b. The value of a long position in the futures contract become negative

c. The value of a short position in the futures contract becomes positive

d. None of the above.

199. Which of the following items in a futures contract is standardized ?

a. Total number of contracts available for sale and purchase

b. Size - the amount of the underlying covered by the contract

c. Price of the underlying asset

d. All of the above.

200. An investor is bulish on a particular stock, but does nor 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 of the particular stock

201. A call option gives the holder the right but not the obligation of buying from the

writer an underlying asset at a specified price on or before the expiry date.

a) True b) false

c) True only in Mumbai d) True only in Delhi

202 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) 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 decided by the exchange


203. Clearing and settlement process comprise the following activities.

a) Clearing b) Settlement

c) Risk Management d) All of the above

204. The clearing mechanism essentially involves

a) Working out open positions b) Obligation of clearing members

c) Both a & b d) None of the above

205. Open position mainly considered for ____________

a) Exposure purpose b) Daily margin purpose


206. Futures & options on Individual securities can be delivered as in the spot

market.

207. The most critical component of risk containment mechanism for F & O segment

is __________

a) Margining System b) Online position monitoring


208. Which of the following factor affect the value of option.

a) Underlying Market price b) Strike Price

c) Volatility d) Time of Expiry

e) Intent Rate

f) all of the above

209. 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

210. the spread / combination contracts in Neat F & O or trade through

a) Spread / combination screen

b) Window watch screen

c) Ticker window

d) Previous Trade screen

211. 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

212. The spread / combination orders attached the condition to __________

Ans) it that unless and until the whole batch of order find a counter match. They shall

not be traded.

213. A stock can be eligible for derivatives trading, if the non-promoter holding in the

company is at least

a) 50% b) 75%

c) 30% d) 20%

213. 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

214. The open position of a client in futures and 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

215. 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

216. 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

a) Net sell positions

217. 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

218. 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 securities is very high

c) Impact cost of the 50 constituent securities is very low

d) All the 50 constituent securities have same impact cost

219. A put option gives the ………. The right but not the obligation to ……… the

underlying asset a specified price.

a) Seller, Buy c) Seller, Sell

b) Owner, Buy d) Owner, Sell

220. Which of the following is a customized contract

a) Forward b) Warrants

c) Swaptions d) All of the Above

221. the following in an example of an order with time condition _______

a) Day order b) stop loss order

c) Limit d) all of the above

221 A. the following in an example of an order with price condition _______

a) Buy limit b) stop loss order

c) Sell Limit d) all of the above

222 A clearing member of F & O segment of NSEIL is required to have a networth of

Rs………… crore and keep collateral security deposit of Rs……… lakh

a) 5,10 b) 5,50

c) 3,100 d), 3,50

223. which of the following international exchanges does NOT trade derivatives?

a) LIFFE b) SGX

c) NYSE d) DTB

224. which of the following is true about NCFM (NSE’s Certification in Financial

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.

205. Final settlement of futures contracts takes place at closing price of the …..

a) Futures contract

c) Underlying

226. Futures are _________

a) Linear Payoffs

227. Options are _________

a) Linear Payoffs

228. Buying put Options is _________ Insurance

a) Buying

c) Buying & Selling

229. Buying call option is ___________ Insurance

a) Buying

c) Buying & Selling

230. LEAPS stands for ___________

a) Long term equity anticipation securities

b) Long term equity application stocks

231. Warrants are ____________

a) Longer dated options

232. Swaps are ______

a) Private agreement between two parties

b) For exchange cash flow in future

b) Expiring contract

d) Near month contract

b) Non linear Payoffs

b) Non linear Payoffs

b) Selling

d) Selling & Buying

b) Selling

d) Selling & Buying

b) short dated options

c) According & pre arrange formula of forward contracting

d) All of the above

233. Swaption is an option to buy or sell a ____ at the expiry of the option

a) Swap b) futures

c) Basket Options d) Warrants

234. 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.

235. Base market capitalization is 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.

236. Movements of the index should represent the return obtain by

portfolios in the country.

a) Typical b) Non typical

c) Average d) none of the above

237. when a client default in making payment in respect of daily settlement, the

contract is ____________

a) Not closed out b) waiting for sometime

c) Closed out d) none of the above

238. when a client default in making payment then amount not paid by client is

adjusted against he __________

a) M.T.M. Margin b) Assignment Margin

c) from Broker Commission d) Initial Margin

239. In an options contract, the option lies with the

a) Buyer b) Both

c) Seller d) Exchange

240. The basis for any adjustment for corporate action shall be such that

a) The value of the position of the market participants on ex-date is higher than

the value of the position on cum-date.

b) The value of the position of the market participants on cum and ex-date for

corporate action shall continue to remain the same as far as possible

c) The value of the position on ex-date will be independent of the value of

position on cum-date as far as possible

d) None of the above

241. In the F&O segment for corporate action shall be carried out on

a) The first day on which a security is traded on a cum basis in the underlying

cash market

b) The first day on which a security is traded on an ex-dividend basis in the

underlying market

c) The Last day on which a security is traded on a cum basis in the

underlying cash market


242. Which of the following is true ?

a) NSE Trades in futures b) NSE trades in Forwards

c) NSE trades both futures and forwards

d) Forwards are traded only in stock at NSE

243. Futures trading first emerged in the exchanges located in ________.

a) ) London b) UP

c) Chicago d) Annual requirements of copper

244. What is the strike price interval when the security is trading Rs.2800/-?

a) Rs.100 b) Rs.50

c) Rs.30 d) Rs.20

245. Weekly options traded on NSE follow an ____________

a) European Style Settlement b) American Style settlement

c) Asian Style Settlement

d) Weekly options are not traded at NSE

246. Equity Index Option are a form of _________

a) Options on Futures b) Basket Options

c) Swaptions d) Warrants

247. ___________ is one of the uses of Derivatives ?

a) Forecasting b) Risk Taking

c) Arbitrage d) All of the above

248. To be eligible for option trading, the _______________ of a stock is taken into

account.

a) Price Limit b) Trading member Position Limit

c) Client Wise position Limit d) Market Wide Position Limit

249. The theoretical futures price is considered for ______________ in case a futures

contract is not traded during the day ?

a) Opening Price b) Last traded Price

c) Premium Settlement d) Daily mark to market settlement

250. An unique user ID is assigned to each _______________________ in F & O

segment of NSEIL.

a) User of the trading member b) director of the trading member

c) branch d) exchange

251. _____________ facility is available on the F & O segment of NSEIL.

a) Stock Trading Facility b) Commodity Trading

c) Carry forward d) Basket trading facility

252. Institutional investors world wide are major users of ______________

a) Stock futures b) Stock Options

c) Index Linked derivatives d) Equity linked derivatives

253. An ‘authorized person in the Futures & Options segment is __________

a) The client of the broker b) a clearing member

c) An approved user of a participant d) all of the above

254. All trading members’ positions are monitored on a real time basis by the

a) Clearing member only b) Trading member only

c) NSCCL d) NSE

255. _____________ contracts are not settled on exercise date ?

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 e) at the money contract

256. _____________ can be bought and sold on an exchange like shares.

a) Index Funds b) Fixed Deposits

c) ETFs d) None of the above

257. Which of the following is the duty of the trading members

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

258. Futures and forwards are similar in the following respects _____________

a) Settlement of contract takes place in the future

b) They have settlement guarantee

c) Positions are market-to-market everyday

d) Contracts are custom designed

259. Which of the following is required for personnel working in the industry in

order to dispense quality intermediation?

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

260. Hedging with stock futures means

a) Long security, short security

b) Long index futures, short index futures

c) Long security, short stock futures

d) Long security, long index futures

261. Which of the following is the duty of the trading member ?

a) Filling of ‘know Your Clients’ form

b) Execution of client Broker Agreement

c) Bringing risk factors to the knowledge of client


262. The _____________ applies to SEBI for the trading member registration.

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

263. Stock options on ICICI Bank Ltd., can be exercised ______________

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.

264. ________________ is allowed to only clear trades of other but not trade

themselves.

a) Trading member - clearing member

b) Trading member are not allowed to clear their own trades

c) Professional clearing member

d) Self clearing member

Q1. Assume that the base value of a market capitalization weighted index were 1000 the base

market capitalization were Rs. 35,000 Crores. If the current market capitalization is Rs. 42,000

crore, the index is at.

1. 1200 2. 1110

3. 1250 4. 1350

Base market capitalization = 35000 CroreIndex for 35000 Crore = 1000Now we have to find 42000 Core index?

Capitalization index35000C 100042000C ?42000/35000*1000 =1.2*1000 =1200

Q2. 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

2. 2040 4. None of the above

Impact cost on index =0.2% Nifty at 2000 So

2000*0.2% 2000*0.2/100 4

We need buy order So add 4 to nifty i.e =2000+4

=2004

Q3. The Market impact cost on a trade of Rs. 3 million of the full Nifty works out to be about

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.

Impact cost on index =0.3% Nifty at 2000

So 2000*0.3% 2000*0.3/100 6

We need sell order So minus 6 from nifty i.e. =2000-6

=1994

Q4. 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


2000*0.05% 2000*0.05/100 1

We need sell order So minus 4 from nifty i.e. =2000-1

=1999

Q5. 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


2000*0.005% =2000*0.005/100 =0.1

We need sell order So add 0.1 to nifty i.e. =2000-0.1

=1999.9

Q6. On 15th January Mr. Arvind 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

Mr. Arvind bought a January Nifty futures at Rs. 269,000Nifty lot is 100

Initial margin = 21,520 (un necessary data no need for problem solution)Each nifty bought value =269000/100=2690 (since nifty lot is 100)Index closed at 2700 (high compare to bought value)

= 2720-2690=30 for each nifty = 30*100 for 100 nifty = 3000

Q7. Kamal sold a January Nifty futures contract for Rs. 269000 on 15th January. For this she

had to pay an initial margin of Rs. 21,520 to her broker. Each Nifty futures contract is for

delivery of 100 Nifities. On 25th January, the index closed at 2520. How much profit / loss

did she make?

1. -17,000 2. -15,000

3. -15,000 4. +17,000

Kamal sold a January Nifty futures at 269000

Nifty lot is 100

(un necessary data no need for problem solution) Each nifty sold value =269000/100=2690

Index closed at 2520

= 2690-2520= 170 for each nifty = 170*100 = 17000 for 100 nifty

Q8. On 15th January, Raju bought one 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 2560.

How much profit / loss did he make?

1. +13,000 2. -13,000

3. -12,500 4. + 12,500

Raju bought Nifty futures at 269,000 Nifty lot is 100 Each nifty bought value =269000/100=2690 Index closed at 2560 (low compare to bought valve)

= 2560-2690=-130 for each nifty = -130*100 = -13000 for 100 nifty

Q9. Krishna Seth sold one January Nifty futures contract for Rs. 269,000 on 15th January. 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 2780. How much profit /

loss did he make?

1. -8,000 2. -9,500

3. -9,000 4. + 9,000

Krishna Seth sold Nifty futures at 269,000

Nifty lot is 100

Closed at 2780

Each nifty sold value =269000/100=2690 Index closed at 2700

= 2690-2780= -90 for each nifty = -90*100

= -9000 for 100 nifty

Q10. 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

Call option strike price = 176

Selling premium=18 The price break the buyer option is 176+18

=194

Q11.A stock currently sells at 120. The put option to sell the stock sells at Rs. 134 costs Rs. 18.

The time value of the option is ______

1. Rs. 18 2. Rs. 14

3. Rs. 4 4. Rs. 12

Stock currently sells at 120 Put option, stock sell at 134 Premium is 18 Time value=premium- intrinsic value Intrinsic value=14 (since 134-120)

=18-14 =4

Q12.An index put option at a strike of Rs. 1176 is selling at 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

Put option strike price=1176

Selling premium=36

The price break buyer option is 1176-36

1140

Q13.a) Suppose the tcs spot is at 1000 and two-month futures trade at 1040. Suppose the

transaction costs involved in placing an index trade are 0.25% and the tcs index dividends

over two months are 0.15%. What is the net rate of return?

1. Rs. 1.5% per month 2. Rs. 1.75% per month

3. Rs. 2.25% per month 4. Rs. 1.92% per month.

Spot value (cash) Two months future (future)

1000 1040

Interest rate Transaction

0% 1000 1040=40‐

For 1000 40

for100 ? (100/1000 *40=4%)

4%

Transaction charges = 0.25%

Dividend=0.10%

Transaction cost=0.15%

Transaction profit = 4.00%

Transaction cost = 0.15%

3.85% for 2 months

1.92% for 1 month (since 3.85/2)

b) Suppose the nifty spot is at 2000 and two month futures trade at 2080. Suppose the‐transaction costs involved in placing an index trade are 0.25% and the ITC index dividends overtwo months are 0.10%. What is the net rate of return?


2000 2080

Interest rate Transaction

0% 2000 2080=80‐

For 2000 80

For 1000 40(1000/2000 *80=40%)

for100 4 (100/1000 *40=4%)

Transaction charges = 0.25%

Dividend=0.10%


Transaction profit = 4.00%

Transaction cost = 0.15%

3.85% for 2 months

1.92% for 1 month (since 3.85/2)

Q14. Suppose the ITC spot is 1000 and the two month futures are at 1010. Suppose each can be

recklessly invested at 1% per month and the transaction costs involved are 0.4%. Then the

total return that can be obtained in stock lending is

1. 0.61% over two months 2. 1.61% over two months

3. 1.01% over two months 4. 1.0% over two months.

Interest rate=1% per month


1000 1010

Interest rate =1% Transaction

(100)+1= 101 1000 1010=10‐

(100+1)+1 1000 10%

100+2 100 1 %(since 100/1000*10)

0.01(interest rate)

2.01= 102.01

,..

Etc like that, we need only for 2months, so interest save for 2months is 2.01

Interest save =2.01

Transaction = 1.00

1.01 (net transaction)

Net transaction=1.01


0.61% for 2 months

Q15. What is the riskless profit that can be earned over two months if the GRASIM spot is at

1000 and the two month futures are at 1010? Suppose cash can be riskless invested at 12%

p.a. and there are no transaction costs.

1. 1.09% 2. 0.9%

3. 0.01% 4. 0.4%

Interest rate=12% per anum


1000 1010

Interest rate =12% =12/100=0.12 Transaction

A=P (1+i)n/12 1000 1010=10‐

=1000(1+0.12)2/12 for 1000 10

=1000(1.12)0.1666 100 1%

=1000(1.01906)

=1019

P=1000

Interest=A P=1019 1000=19 ‐ ‐

So 1000 19

100 1.9(100/1000*19)

So 1.9 - 1=0.9%

Q16. Suppose GRASIM spot is 1100 and the two-month futures are at 1120. Interest save is 3.01

per 2months and there are no transaction costs. Then the total return that can be obtained in

stock lending is

1. 1% over two months 2. 1.55% over two months

3. 1.2% over two months 4. 0.20% over two months.


1100 1120

Interest rate/save Transaction

3.01 1100 1120=20‐

1100 20

100 1.81 %( since 100/1100*20)

So 3.01 1.81=1.2% for 2 months ‐

Q17. Suppose the GTL spot is at 200 and two-month futures trade at 208. Suppose the

transaction costs involved are 0.20% and dividends over two months are 0. What is the rate of

return in loaning money to the market?

1. 1.8% per month 2. 1%per month

3. 1.25% per month 4. 1.75% per month.

5. 2% per month.


200 208

Interest rate/save Transaction

0% 200 208=8‐

200 8

100 4(since 100/200*8)

Transaction cost=0.4

Dividend=0%

0.4%

So 4-0.4=3.6% for two months

1.8% for a month (3.6/2)

Q19. What is the fair value of one month future if the spot value of Nifty is 2300. The money

can be invested at 11% p.a. and Nifty gives a dividend yield of 1% per annum.

1. 2324 2. 2350

3. 2318 4. 2309

P=2300(nifty spot)

i=11%

Dividend=1%

Net cost= 10%=10/100=0.10(interest rate)

One month future so t=1

A=P (1+i)t/12

2300(1+0.10)1/12

2300(1.10)0.0833

2300(1.0079)

2318.3

Q20. What is the fair value of one month future if the spot value of Nifty is 2300? The money

can be invested at 14% p.a. and Nifty gives a dividend yield of 4% per annum.

1. 2309 2. 2370

3. 2318 4. 2350

P=2300(nifty spot)

i=14%

Dividend=4%

Net cost= 10%=10/100=0.10(interest rate)

One month future so t=1

A=P (1+i)t/12

2300 (1+0.10)1/12

2300(1.10)0.0833

2300(1.0079)

2318.3

Q21. The Nifty spot stands at 2520 and the cost of financing is 12%per year. What is the fair

value of one-month Nifty futures contract?

1. 2540 2. 2550

3. 2544 4. 2555

T=1

P=2520

I=12%=0.12

A=P (1+0.12)1/12

=2520(1.12)0.0833

=2520(1.009484)

=2544

Q22. The Tata Tea trades on the spot market at Rs.177. The cost of financing is 12% per year.

What is the fair value of one-month futures on Tata Tea?.

1. 178.65 2. 180.15

3. 179.90 4. 177.65

T=1

P=177

I=12%=0.12

A=P (1+0.12)1/12

=177(1.12)0.0833

=177(1.009484)

=178.6

Q23. The Tata Tea trades on the spot market at Rs. 177. The cost of financing is 12% per year. If

is expected to pay a dividend of Rs. 10, 30 days later. What is the fair value of three-month

futures on Tata Tea?

1. 173.65 2. 182.05

3. 171.9 4. 177.65

T=3

I=12%=0.12

P=177

A=177(1+0.12)3/12 - 10(1.12)2/12

=177(1.12)0.25 10(1.12)‐ 0.166

=177(1.02873) 10(1.01899) ‐

=182.08 10.18 ‐

=171.90

Q24. The ITC trades on the spot market at Rs. 720. The cost of financing is 15% per year.. What

is the fair value of two-month futures on ITC?

1. 736.73 2. 731.45

3. 728.65 4. 732.55

T=2

P=720

I=15%=0.15

A=P (1+0.15)2/12

=720(1.15)0.166

=720(1.02347)

=736.89

Hedging strategies :

Suppose ‘a’ takes long position and ‘b’ take short position the

following case are

If ‘a’ equals ‘b’ i.e. complete/perfect hedging

‘a’ value nearer to ‘b’ i.e. partial hedging

‘a’ value more than ‘b’ i.e. over hedging

Q25. The beta of SBIBANK is 0.8. A person has a long position of Rs. 200,000 of SBIBANK.

Which of the following gives a complete hedge?.

1. Sell 200,000 of Nifty 2. Buy 160,000 of Nifty

3. Buy 200,000 of Nifty 4. Sell 160,000 of Nifty

Beta=0.8

Long position 200000

So 0.8 * 200000=160000

The person has long so sell/short 160000 for complete perfect hedge

Q26. 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 is1.2.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 cres

3. Short Nifty Rs. 1 crore 4. Long Nifty Rs. 1.2 crore

5. Do nothing.

Beta=1c

Long position 1.2c

So 1 * 1.2=160000

The person has long so sell/short 1.2 for complete perfect hedge

Q27. 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

3. He has a complete hedge against fluctuations of Nifty

5. He is bearish on Nifty as well as on SBI

2. He is bullish on Nifty and

bearish on SBI

4. This is not a hedge; it is just

speculations of Nifty

6. He is over hedge.

SBI beta=0.8 Nifty short position is 1L

Long position is 200000

So 0.8 *200000=1.6L

SO PARTIAL HEDGE

Q28. 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

3. He is under hedged

beta=1.03


So 1.03 *200000=2.06L

2. He is completely hedge


Nifty short position is 2.5L

OVER HADGE

Q29. Hari buys 1000 shares of HPCL at Rs. 380 and obtains a complete hedge by shorting 300

nifities at Rs. 1944 each. He closes out his position at the closing price of the next day; at

this point HPCL has dropped 5% and the Nifty futures have dropped 4%. What is the

overall profit / loss of this set of transaction?

1. Profit of 4328 2. Profit of Rs. 9,500

3. Profit of Rs. 9,500 4. Profit of Rs. 11,664

HPCL NIFTY

Buy: 1000 shares Short: 300 shares

At: 380 At: 1944

-5% dropped -4% dropped

380*(-5%) 1944*(-4)

380*(-5)/100= -19 1944*(-4)/100= -77.76

So 1000 *(-19)= -19000 300*(-77.76)= -23328

Buy-sell

= -19000-(-23328)

=-19000+23328

=4328(profit)

Q30. Hari buys 2000 shares of HLL at Rs. 210 and obtain 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. 6,356 2. Profit of Rs. 4,200

3. Loss of 4088 4. Loss of Rs. 12,712

HLL NIFTY

Buy: 2000 shares Short: 200 shares

At: 210 At: 2156

-2% dropped 1% UP

210*(-2%) 2156*(1%)

210*(-2)/100= -4.2 2156*(1)/100= 21.56

So 2000 *(-4.2)= -8400 200*21.56=4312

Buy-sell

= -8400-(4312)

= -12712

Q31. 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 200,000 of Nifty 2. Sell 160,000 of Nifty

3. Buy 200,000 of Nifty 4. Buy 160,000 of Nifty

5. Do nothing.

Beta of OBC is 0.8

Short position is 200000

So 0.8 *200000=160000

He has short position so long/buy 160000 nifty for perfect/complete hedge

Q32. The beta of SBI is 0.8. a person has a SHORT SBI position of Rs. 200,000 coupled with a

long Nifty position of Rs. 100,000. Which of the following is true?.

1. He has a partial hedge against 2. He is bullish on Nifty and

Fluctuations of Nifty bearish on SBI

3. He has a complete hedge against 4. This is not a hedge; it is just

Fluctuations of Nifty Speculation

5. He is bearish on Nifty as well on SBI 6. He is over hedged

SBI beta=0.8 Nifty short position is 1L


So 0.8 *200000=1.6L

SO PARTIAL HEDGE

Q33. A speculator expects that the rupee will appreciate and hence profits of PENTSFWARE

will fall. Hence he does short pent software to the tune of Rs. 2 loch. The beta of

PENTSFWARE is 1.03. In order to remove his Nifty exposure, He does LONG NIFTY to

the TUNE OF Rs. 2.5 lakh. Which is true?

1. He is over hedged

3. He is under hedged

Beta=1.03


So 1.03 *200000=2.06L

Over hedge

2. He is completely hedged


Nifty short position is 2.5L

Q34. Hari sell 2000 shares of HLL at Rs. 210 and obtains 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 the Nifty futures have fallen 1%. What is the overall

profit/loss of this set of transactions?

1. 12612 2. 12800

3. -12712 4. 12912

HLL NIFTY

Sell: 2000 shares buy: 200 shares

At: 210 At: 2156

2% up 1% dropped

210*(2%) 2156*(-1%)

210*(2)/100= 4.2 2156*(-1)/100=- 21.56

So 2000 *(4.2)= 8400 200*-21.56=-4312

Buy-sell

= -4312-8400

= -12712

Q35. The beta of ITC is 1.6 and the total risk OF ITC is 9. The daily σ of 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

Beta=1.6

σ = 1.3

V=9

A formula is: V - σ2 * B2

9- (1.3)2*(1.6)2

9- (1.69)*(2.56)

9- 4.3264

4.67

Q36. 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

Amount beta weighted beta

1000 * 1.1 1100

1000 * 0.8 800

2000 1900

Portfolio beta=weighted beta/total amount

=1900/2000

=0.95

Q37. A portfolio is composed of Rs. 1,000 invested in securities with beta 1.2 and Rs. 2000 in a

security with beta 0.9. What is the portfolio beta?

1. 1.2 2. 1.1

3. 0.9 4. 1.0

Amount beta weighted beta

1000 * 1.2 1200

2000 * 0.9 1800

3000 3000

Portfolio beta=weighted beta/total amount

=3000/3000

=1

Q38. On 1Jan 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 2. Buy Nifty Futures Rs. 1

February Expiration Million February Expiration

3. Short Nifty futures Rs. 1.3 Million, 4. Buy Nifty futures Rs. 1.3

March expiration Million, March Expiration.

Buy: 2million

Beta is 0.5

So 2*0.5=1million

He has buy position so short 1 million nifty for perfect/complete hedging

Q39. 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 March as there is a marriage in the family. So he wants to

totally remove his equity market risk. The investor wants to be over-cautions so he sells

Rs. 2 million of the Nifty futures. What has he achieved?

1. He is partially hedged.

3. He is completely hedged

Buy:1 million

Beta is 1.3

So 1*1.3=1.3 million

2. He is over hedged (he has

Effectively become a speculator

betting that Nifty will drop).

4. None of the above.

sell:2 million nifty

Over hedge

Q40. When the nuclear bombs go off, an investor with $1 billion invested in India becomes

fundamentally gloomy about India and wants to embark a hedging program for the next

three years. He will sell $1 billion of Nifty futures now, and constantly initiate new futures

position as old one expire. What is the major problem with this strategy?.

1. He suffers from pollover risk of getting into

new position on the futures positions.

3. He will have to recalculate his beta from time

to time when adopting new futures positions.

Ans:Just read and remember it

2. He will suffer market impact

Cost selling $1 billion of the

Nifty futures.

4. He would just be better off

liquidating his portfolio,

staying out for 3 years, and

then getting back into equity.

Q41. A long position of 10 market lots of Nifty Sep futures is purchase 2200 and held till expiry

when the Nifty closes at expiry in September 25th 2248. What would be the profit on this

position ?.

1. 1,148,000 2. 24,000

3. 1,124,000 4. 48,000

Nifty futures purchase at: 2200

Expiry : 2248

48

Long position in 10 lots

So 48*10 lots

48*10*100 (since one lot=100 shares)

48000

Q42. Babbanseth expects a bumper agricultural harvest. He is highly optimistic about the

performance of the economy. He hopes the market will go up and buys 10 market lots of

the Nifty December futures. Nifty December futures trade at 2300. His forecasts come true

and he closes his position at maturity at 2354. How much profit does he make?

1. 2,300,000 2. 54,000

3. 2,348,000 4. 480,000

Nifty futures at: 2300

Expiry : 2354

54


So 54*10 lots


54000

Q43. 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 Dec

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. 1,150,000 2. 48,000 .

3. 1,174,000 4. 480,000

Nifty futures purchase at: 2300

Expiry : 2252

48


So 48*10 lots


48000

Q44. 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 contracts

2. Sell 10 Reliance futures contracts 4. Sell 5 Reliance futures contracts.

Ans: just read and remember it

Q45. 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. 15000


Reliance futures at: 296000

Buy 10 lots of one month futures

So, 296000/1000=296

Expiry at: 271

271- 296= -25

2. loss of Rs. 15000

4. Loss of Rs. 25000

(since one lot=100 shares)

10 lots=1000 shares

Calculations on 10 lots so -25*1000= -25000

Q46. Rajiv is bearish about ACC and sells twenty one-month ACC futures at Rs. 3,04,000. On

the last Thursday of the month. ACC closes at Rs. 134. He makes a …….



Acc futures at 304000

Sell 20 lots so 134*2000=268000

304000-268000=36000



Q47. 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 than10%, 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

2. 2260 4. None of the above.

Nifty stands at 2500

Index falling 10%

So 2500*(-10%)

2500*(-10)/100

250

2500 - 250=2250

Q48. 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

2. Five 4. Ten.

Currently nifty 2500Strike rate 2400

So 2500-2400=100For 2500 100

100 4 (since 100/2500*100)

Q49. 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

2. Five 4. Ten

Currently nifty 2500Strike rate 2300

So 2500-2300=200For 2500 200

100 8 (since 100/2500*200)

Q50. 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 January 2250 Nifty puts. Now your portfolio is

1. Partially insured against a 10% drop in the 2. Under-insured against a 10%

index. Drop in the index.

2. Over-insured against a 10% drop in the4. Adequately insured against a 10%

index. Drop in the index.

Q51. 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.

Nifty spot 2500

3. Adequately insured against a 10%

Drop in the index

Up to 10% loss is bearable loss

2250

Exceeding 10% unbearable or over insured

So over insured 10% drop in index

Q52. 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. 19,000 4. None of the above.

Colses at 2590

70

Strike price 2520 15% premium paid

Spot 2400

Pay out=2590-2520=70

Premium paid=-15

Pay off=55*100=5500 (since 70-15=50)

Q53. Chetan is bullish about the index. Nifty stands at 2400. He decides to buy one three month

Nifty call option contract with a strike of 2520 at Rs. 20 a call. Three month later the index

closes at 2480. His pay off on the position is

1. -7,000 2. -4,000

3. -2,000 4. -6,000

2520(strike price) 20% premium

2480(closing)

2400(spot)

Pay out=0

Premium paid=-20

Pay off=-20*100=2000

Q54. 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 Rs. 20 per put . Three months later

the index closes at 2520. His payoff on the position is.

1.Rs. 7,000

3. Rs. 19,000

Pay in =25(2545-2520) Premium received=20 Pay off=-5*100=-500

2. Rs. - 500

4. None of the above.

2600(spot)

2545(strike price) 20% premium received

2520(closing)

(since 20-25)

Q55. 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 months later the

index closes at 2450. His payoff on the position is.

1. Rs. 6,000 2. Rs. 7, 500


Strike price 2550

50

Spot 2500 100

closing 2450

pay out=100

premium paid=-60

pay off=40*100=400

note:intrinsic value=50

time value=premium paid - intrinsic value

=60-50=10

Q56. Anant is bearish about the index. Spot Nifty stands at 2500. He decides to buy one

threemonth 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. -2650 4. -12,000

2520 (closing)

2500 (spot)

2450 (strike price) 10% premium paid

Pay out=0

Premium paid =-10

Pay off=-10*100=-1000

Q57. Anand is bearish about the index. Spot Nifty stands at 2500. He decides to sell one three-

month Nifty call option contract with a strike of 2550 at Rs. 28.60 per call. Three months

later the index closes at 2450. His payoff on the position is.

1.Rs. 2,860 2. Rs. 7,500


Strike price 2550 premium received 28.60

spot 2500

2450(closing)

Pay in =0

Premium recived=28.60

Pay off=28.60*100=2860

Q58. Anish is bearish about the index. Spot Nifty stands at 2500. He decides to sell one three-

month Nifty call option contract with a strike of 2550 at Rs. 28.60 per call. Three months

later the index closes at 2582. His payoff on the position is.

1.-1,720 2. 3,400

3. -4,000 4. - 340

2582(closing)

(-32)

2550(strike price) 28.60 premium received

2500(spot)

Pay in=-32

Premium received=28.60

Pay off=-3.4*100=-340

Q59. 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. Three-months puts 4. A three-month calls and sell a three

5. A three-month call and a three-month put months put with the same

strike.

Just read it

Q60. 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

Outstanding/open position=buy-sell

=800-400

=400

Q61. A Trading member Monojbhai took proprietary positions in a November 2000 expiry

contract. He bought 3000 trading units at 1210 and sold 2400 at 1220. The end of day

settlement price for November 2000 expiry 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

Manojbhai would be

1.Rs. 60,000 2. Rs.3,00,00

3. Rs. 30,000 4. Rs. 5,40,000

He bought=3000

Sold=2400

600

Initial margin=100

=600*100=60000

Q62. 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

Buy 800 units @1040

Sell 600 units @1045

Settlement price 1035

2. +6000

4. +2000

-5*800= -4000

10*600= 6000

2000

Q63. The following are the details of trading member Ratanlal’s proprietary and client position.

Proprietary: he buys 600 units @ 1020 and sells 1800 units @1025.

Client A: he buys 2000 units @ 1015

Client B: he buys 1600 units @ 1016 and sells 800 units @ 1022.

The settlement price of the day is 1023. what is MTM profit/loss for Ratanlal?

1.Rs. 31,800

3. Rs. 28,400

Buy 600 units @1020

Sell 1800units@1025

Client A buy 2000 units@1015

B buys 1600units@1016

C sells 800 units@1022

Settlement price 1032

2. Rs.26,600

4. Rs. 31,200

3*600= 1800

2*1800= 3600

8*2000=16000

7*1600=11200

- 1*800= -800

31800

Q64. Ramesh is bullish about cipla which trades in the spot market at Rs. 1025. he buys two

one-month call option contracts on CIPLA what strike of 1050 at a premium of Rs. 10 per

call. One month later, CIPLA closes at Rs. 1080. his profit (payoff) on the position is

1. Rs. 6000 3. Rs. 4500

2. Rs.1500 4. Rs. 4000

1080(closing)

(30)

1050(strike price) premiumpaid 10%

He buy 2 lots (since 1lot=100 shares,2lot=2*100=200)

=20*200 (since30-10)

=4000

Q65. The May futures contract on INFOSYSTCH closed at Rs. 3940 yesterday. It closes today

at Rs. 3898.60. The spot closes at Rs3800. Raju has a short position of 3000 in the May

futures contract. He sells 2000 units of may expiring put options on INFOSYSTCH with a

strike price of Rs. 3900 for a premium of Rs. 110 per unit. What is his net obligation to/

from the clearing corporation today?

1. Paying of Rs. 344200 3. Payout of Rs. 344200

2. Payout of Rs.640000 4. Payin of Rs. 95800

Infosys closed yesterday=3940

Today=3898.60

41.40

Short position in may future=3000 So 3000*41.40=124200 1

Infosys strike price 3900 premium 110Put sells

2000

110*2000=220000 2

Add 1and 2=344200

Q66. A member is short 400 March futures contracts and long 200 April futures contracts. A

calendar spread in this case will be

1. Long 200 futures contracts 3. Long 400 futures contracts

2. Short 200 futures contracts 4. Short 400 futures contracts

Simple 400 -200=200 short

Q67. If the daily volatility of Nifty is 1.92, the sigma figure used in the Black-scholes formula

should be

1. 30% 3. 1.38%

2. 1.92% 4. 35%

V=1.92

Here no. working days not given, consider 250 days

Black scholes formulae=V *‐ √ no working days in a year

=1.92*√250

=1.92*15.85

=30.35

Q68. assume that the daily volatility of Nifty is 1.75, and trading happens on 256 a year. The

sigma figure

1. 30% 3. 1.38%

2. 1.92% 4. 28%

V=1.75

No working days=256

i.e. 1.75*√256

1.75 * 16

28

Q69. If the annual risk-free rate is 12% then the ‘r’ used in the Black-scholes formula should be

1. 0.1133 3. 1.12

2. 0.12 4. none of the above

Interest rate i=1+r = 1+12% =1+0.12 (12%=12/100)=1.12

In calculator, click the button “ln” first, after clicking enter the value 1.12 Now u gets answer 0.113

Q70. If the annual risk-free rate is 10% then the ‘r’ used in the Black-scholes formula should be

1. 0.095 3. 1.12

2. 0.12 4. none of the above

Interest rate i=1+r = 1+10% =1+0.10 (10%=10/100)=1.10

In calculator, click the button “ln” first, after clicking enter the value 1.10 Now u gets answer 0.095

Q71. On 1st February, a call option on the Nifty with a strike of 2550 is available for trading.

Expiration date is 22nd February, The “T” that is used in the Black-Scholes formula should

be.

1. 0.06 3. 22

2. 0.09 4. None of the above

Expiry date is 22

Taking full one year days so22/365=0.06

Q72. On 1st January, a three-month call option on the Nifty with a strike of 2520 is available for

trading. The “T” that is used in the Black-Scholes formula should be

1. 0.25 3. 90

2. 3 4. None of the above

Three months call option one year means 12 months so 3/12=0.25

Q73. Mr X short 500 Satyam Comp.on 10th July 2002 put at strike price Rs.210 for premium of

Rs.14/- each. On 22nd July 2002(the expiration day of the contract) the spot price of

Satyam comp. closed on Rs.224. while July future of Satyam comp. closed at Rs.222. Does

Mr X have an obligation to the clearing corporation on his position and how much?

If

any?

1. Yes, Rs 7000 pay-out 3. Yes, Rs 7000 pay-in

2. No pay-in or payout on expiration contract 4. Yes, Rs 70000 pay-out.

Read question careful and remember answer

Q74. In two stock index, the current market capitalization of stock A is Rs.1750 million and the

Stock B is Rs.2400 million . If the Base market capitalization of two stock index was

Rs.4500 million and base index was 1000 points, the current level of the two stock Index is

______ points

1. 922.2 3. 1458.3

2. 984.3 4. 1084.3

Capitalization of A=1750

Capitalization of B=2400

4150

Base capitalization of A and B=4500

Both base index=1000

Two stocks index point?

4150/4500*1000

922.2

Q75. In two stock index, the current market capitalization of stock A is Rs.1750 million and the

Stock B is Rs.2400 million . If the Base market capitalization of two stock index was

Rs.3500 million and base index was 1000 points, the current level of the two stock Index is

______ points

1. 1452.5 3. 1185.7

2. 1458.3 4. 843.3

Capitalization of A=1750

Capitalization of B=2400

4150

Base capitalization of A and B=3500

Both base index=1000

Two stocks index point?

4150/3500*1000

1185.71

Q76. Transaction tax is payable by the __________ of the derivative instrument (option Seller &

futures seller) at ____________ rate

1. Buyer, 0.017% 3. Designer, 0.125%

2. Seller, 0.017% 4. Originator, 0.125%

Q77. Mr. A Sells 10 lots of futures contract of M/s. XYZ Ltd. (1 Lot : 100 shares) expiring on

25th January, 2006 for Rs. 300. The spot price of the share is Rs. 290. The securities

transaction tax thereon would be _______.

1. Rs. 10 3. Rs. 80

2. Rs. 20 4. Rs. 51

A sells 10 lots

Strike price is 300, so 300*10 lots=300000 (since10 lots=1000)

Transaction tax=0.017% u have to remember Security transaction tax=300000*transaction tax

=300000*0.017% =300000*17/100000 (0.017%=0.017/100=17/100*1000)=51

Q78. Ms. Asha sells 10 lots of options contract of M/s. XYZ Ltd. (1 Lot : 100 shares) expiring

on 25th January, 2006 for Rs. 10. The strike price of the contract is Rs. 300. The spot price

of the share is Rs. 290. the securities transaction tax thereon would be _________

1. Rs. 10 3. Rs. 40

2. Rs. 53 4. Rs. 11

Asha sells 10 lots

Strike price 300,here premium received is 10,so add it to strike price i.e. 310

310*10 lots

310000

Security transaction charge/tax=310000*transaction tax

=310000*0.017%

=310000*17/100000 (since above problem)

=31*17/10

=31*1.7

=52.7

derivative market dmdm

Documents