NISM Series VIII: Equity Derivatives Certification Examination 1. An index option is a __________________. __________________. Debt instrument Derivative product [Correct answer NOT selected] Cash market Cash market product Money market instrument . !he purchase o" a share in one market and the simultaneous sale in a di""erent market to bene"it "rom price di""erentials is known as ____________. ____________. Mort#a#e Arbitra#e [Correct answer NOT selected] $ed#in# %peculation &. 'inancial &. 'inancial derivatives provide the "acility "or __________. %peculation $ed#in# Arbitra#in# All o" the above above [Correct answer NOT selected] (. )perational risks include losses due to ____________. *nade+uate disaster plannin# plannin# [Correct answer NOT selected] !oo !oo much o" mana#ement control *ncome tax re#ulations ,overnment policies -. *mpact cost is low when the li+uidity in the system is poor. !rue 'alse [Correct answer NOT selected] . /ou sold one 0/ %tock 'utures 'utures contract at 2s. 34 and the lot si5e is 1677. 8hat is your pro"it 9:; or loss 9<;6 i" you purchase the contract back at 2s. -= 1677 1-677 [Correct answer NOT selected] <1-677 <1677 3. /o /ou have taken a short position o" one contract contrac t in >une 0/ "utures 9contract multiplier -7; at a price o" 2s. &6(77. 8hen you closed this position a"ter a "ew days6 you reali5ed that
you made a pro"it o" 2s. 176777. 8hich o" the "ollowin# closin# actions would have enabled you to #enerate this pro"it= 9/ou may i#nore brokera#e costs.; %ellin# 1 >une 0/ "utures contract at &77 ?uyin# 1 >une 0/ "utures contract at &77 ?uyin# 1 >une 0/ "utures contract at &77 [Correct answer NOT selected] %ellin# 1 >une 0/ "utures contract at &77 4. 8hich o" the "ollowin# is closest to the "orward price o" a share6 i" Cash @rice 2s.3-76 'orward Contract Maturity months "rom date6 Market *nterest rate 1B= 33.3- [Correct answer NOT selected] 4(7 (7.4 . *" you have sold a 0/ "utures contract 9contract multiplier -7; at &177 and bou#ht it back at &&776 what is your #ainloss= A loss o" 2s. 176777 [Correct answer NOT selected] A #ain o" 2s. 176777 A loss o" 2s. -6777 A #ain o" 2s. -6777 17. A calendar spread contract in index "utures attracts ___________. %ame mar#in as sum o" two independent le#s o" "utures contract Eower mar#in than sum o" two independent le#s o" "utures contract [Correct answer NOT selected] $i#her mar#in than sum o" two independent le#s o" "utures contract Fo mar#in need to be paid "or calendar spread positions 11. Client A has purchased 17 contracts o" December series and sold 3 contracts o" >anuary series o" the F%G Fi"ty "utures. $ow many lots will #et cate#ori5ed as re#ular 9non
1(. 8hen the near le# o" the calendar spread transaction on index "utures expires6 the "arther le# becomes a re#ular open position. !rue [Correct answer NOT selected] 'alse 1-. %ellin# short a stock means ___________. %eller does not own the stock he is supposed to deliver [Correct answer NOT selected] %eller has to deliver the stock within a short time %eller owns the stock he is supposed to deliver %eller has more than a yearHs time to deliver the stock which he sold 1. !he buyer o" an option cannot lose more than the option premium paid. !rue only "or Guropean options !rue only "or American options !rue "or all options [Correct answer NOT selected] 'alse "or all options 13. Cost o" carry model states that ______________. @rice o" 'utures %pot : Cost o" Carry [Correct answer NOT selected] @rice o" 'utures %pot < Cost o" Carry @rice o" 'utures %pot @rice @rice o" 'utures Cost o" Carry 14. 8hat role do speculators play in the "utures market= !hey take delivery o" the commodities at expiration !hey produce the commodities traded at "utures exchan#es !hey add to the li+uidity in the "utures markets [Correct answer NOT selected] !hey trans"er their risk to the hed#ers 1. /ou sold a @ut option on a share. !he strike price o" the put was 2s.(- and you received a premium o" 2s.( "rom the option buyer. !heoretically6 what can be the maximum loss on this position= 1 [Correct answer NOT selected] 7 7 ( 7. Current @rice o" 0/ %tock is 2s. 4. 2s. 7 strike call is +uoted at 2s. (-. 8hat is the *ntrinsic Ialue= 1 [Correct answer NOT selected] (7
1. A european call option #ives the buyer the ri#ht but not the obli#ation to buy "rom the seller an underlyin# at the prevailin# market price Jon or be"oreJ the expiry date. !rue 'alse [Correct answer NOT selected] . A put option #ives the buyer a ri#ht to sell how much o" the underlyin# to the writer o" the option= Any +uantity )nly the speci"ied +uantity 9lot si5e o" the option contract; [Correct answer NOT selected] !he speci"ied +uantity or less than the speci"ied +uantity !he speci"ied +uantity or more than the speci"ied +uantity &. An in
4. Mr. 0 purchases 177 put option on stock % at 2s. &7 per call with strike price o" 2s. 47. *" on exercise date6 stock price is 2s. &-76 i#norin# transaction cost6 Mr. 0 will choose _____________. !o exercise the option Fot to exercise the option [Correct answer NOT selected] May or may not exercise the option dependin# on whether he is in his hometown or not at that time May or may not exercise the option dependin# on whether he like the company % or not . !hree Call series o" 0/ stock < >anuary6 'ebruary and March are +uoted. 8hich will have the lowest )ption @remium 9same strikes;= >anuary [Correct answer NOT selected] 'ebruary March All will be e+ual &7. 8hich is the ratio o" chan#e in option premium "or the unit chan#e in interest rates= Ie#a 2ho [Correct answer NOT selected] !heta ,amma &1. *" you sell a put option with strike o" 2s. (- at a premium o" 2s.(76 how much is the maximum #ain that you may have on expiry o" this position= 4(7 [Correct answer NOT selected] 7 7&. *" an investor buys a call option with lower strike price and sells another call option with hi#her strike price6 both on the same underlyin# share and same expiration date6 the strate#y is called ___________. ?ullish spread [Correct answer NOT selected] ?earish spread ?utter"ly spread Calendar spread &&. )n the derivative exchan#es6 all the orders entered on the !radin# %ystem are at prices exclusive o" brokera#e. !rue [Correct answer NOT selected] 'alse
&(. A trader has bou#ht 177 shares o" 0/ at 2s.347 per share. $e expects the price to #o up up but wants to protect himsel" i" the price "alls. $e does not want to lose more than 2s.1777 on this lon# position in 0/. 8hat should the trader do= @lace a limit sell order "or 177 shares o" 0/ at 2s.337 per share @lace a stop loss sell order "or 177 shares o" 0/ at 2s.337 per share [Correct answer NOT selected] @lace a limit buy order "or 177 shares o" 0/ at 2s.37 per share @lace a limit buy order "or 177 shares o" 0/ at 2s.337 per share &-. *nvestor A wants to sell 7 contracts o" Au#ust series at 2s.(-77 and *nvestor ? wants to sell 13 contracts o" %eptember series at 2s.(--7. Eot si5e is -7 "or both these constracts. !he *nitial Mar#in is "ixed at B. $ow much *nitial Mar#in is re+uired to be collected "rom both these investors 9sum o" initial mar#ins o" A and ?; by the broker= 6376777 -6767-7 [Correct answer NOT selected] 6&67-7 (6176777 &. A member has two clients C1 and C. C1 has purchased 477 contracts and C has sold 77 contracts in Au#ust 0/ "utures series. 8hat is the outstandin# liability 9open position; o" the member towards Clearin# Corporation in number o" contracts= 477 1377 [Correct answer NOT selected] 77 177 &3. A de"aultin# memberHs clients positions could be trans"erred to ____________ by the Clearin# Corporation. Another solvent member [Correct answer NOT selected] !he Gxchan#e A suspense account Grror account &4. ClientsH positions cannot be netted o"" a#ainst each other while calculatin# initial mar#in on the derivatives se#ment. !rue [Correct answer NOT selected] 'alse &. Mark
(7. Ialue
(3. Ialue
!he open intrest !he triple witchin# hour -. a port"olio o" & million ha sbeta o" 1.(7 a complete hed#e is obtained by _______ . ?uyin# rs & million o" ni"ty "ut. %ellin# rs (. milion on ni"ty "uture [Correct answer NOT selected] ?uyin# rs (. milion on ni"ty "uture %ellin# o" rs & million o" ni"ty "ut
-&.suppose the company wipro taded at (77 in the cash market and three month wipro "utures traded at (17 i" the transaction costs involved are 7.7(B what is the arbitra#e return possible .1B per month 7.37B [Correct answer NOT selected] 7.47B 1.7B -&. An export would _____ dollar "orward to lock exchan#e rate. sell[Correct answer NOT selected] buy hold exchan#e -(. automatic exercise o" the option contract means_____ All in Lthe Lmoney contracts are exercise automatically on the expiration day. [Correct answer NOT selected] --. Ms shetty ha sold 1777 calls on abc ltd at a strike price o" 2s 44- "or a premium o" rs 3 per call on april 1 the closin# price o" e+uity shares o" abc ltd is 2s 47 on that day i" the call option is assi#ned a#ainst her on that day what is her obli#ation on april 71= @ay out o" 2s &77 @ay in o" 2s 777 @ay in o" 2s -777 @ay out o" rs 777 [Correct answer NOT selected] -. clearin# members in ') se#ment are monitored by F%CCE )n the real time basis "or _______. 1. contact wise position limit violation 2ulNes violation M!M value vioNation [Correct answer NOT selected] All the above -3. to calculate the mimimum net worth o" derivative clearin# members the non allowabke assets includes
@led#ed securities members card Doubt"ul debts and advances All o" the above[Correct answer NOT selected] -4. daily settlement mark to market mar#in o" e+uity index "utures should be credited debited to Mark to market mar#in Le+uity index "utures account [Correct answer NOT selected] -. which o" the "ollowin# exchan#es was the "irst to start tradin# "inancial "utures Chica#o mercantile exchan#e[Correct answer NOT selected] 7.the Chica#o board o" the trade was "ormed primarilt "or @rovidin# a centralised location "or buyers and sellers to ne#otiate "orward contract in commodities. [Correct answer NOT selected] 1. i" the annual risk "ree rate is 11B then r used in the black schools "ormula should be 7.17([Correct answer NOT selected] . the current level o" the %@ CF0 Fi"ty is -(77 the annual dividend yield on the %@ CF0 is -B the annual risk "ree intrest rate is B the "air "uture price "or a contract on the %@ CF0 Fi"ty due to expire & months "rom now should be Ans. -(1( (fair value =Se(r!"#t# $%. &erivatives brokers 'dealers should avoid recommending opening futures 'options unless! They have reasonable basis for belivinh that the cutomer has knoledge and )nancial experience They have reasonable basis for beliving that the cutomer is applicable of exaluating and )nancially able to bear the risk of the transaction *oth of the above[Correct answer NOT selected]
(. suppose Fi"ty is at --77 in Fovember an investor Mr A Gxecutes a short stran#le by sellin# a 2s -&77 Fi"ty @uts a premium o" rs & and a 2s -377 ni"ty call "or (& rs what will be his net payo"" i" ni"ty closes on expiry Ans O [Correct answer NOT selected] 65. which of the following is true about option spread starategies? Limited prot and llimited loss [Correct answer NOT selected]
. Mr y is bearish om market currently ni"ty is tradin# at -477 he short ni"ty option o" price o" --77 at 2s &-7 and lon# a 777 call option at a premium o" 2s 77 what is the ?G@ "or this strate#y= Ans O--7 9?G@ loer strike : net premium recived ; --77:1-7 3. investors sell call and put option o" the same strike price and same expiry strate#y is known as %hort straddle 4. ehat is the maximum pro"it on lon# straddle option strate#y = Pnlimited . suppose ni"ty is at -(-7 on 3 th april an investor mr a enters into a short straddle by sellin# a may rs --77 ni"ty put "or rs 4- and a may rs --77 ni"ty call "or rs 1 what is maximum pro"it in this strate#y = 73 9premium resived 4-:1; +,. . suppose ni"ty is at --77 in may an investor mr a executes a lon# stran#le by buyin# a rs -&77 ni"ty put "or a premium o" rs & and a rs -377 ni"ty call "or rs (& what is the net payo"" i" ni"ty close at -477 on expiry
&( [Correct answer NOT selected] 31. %uppose ni"ty is at -477 in Fovember an investor Mr ram execute a short stran#le by sellin# a rs -77 ni"ty put "or a premium o" rs ( and rs 777 ni"ty call "or rs 47 what will be his maximum pro"it by this strate#y 1(( [Correct answer NOT selected] maximum pro"it on short stran#le is total premium recived 9(:471((; 3. i" an investor has an short term neutral to moderately bullish view on the stock he holds what optn strate#y he will apply Coverd call [Correct answer NOT selected] 3&. mr a bou#ht xy5 ltd "or rs 77 nad simultaneously sell a call option at a strike pice o" rs - what will be his ?G@= -&- 9bep stock price Lcall premium recived; [Correct answer NOT selected] 3(. a collar strate#y is an extension o" covered call strate#y in this statement is "alse= Fo [Correct answer NOT selected]
