Derivatives - 2 quiz

An index option is a __________________.

• Debt instrument

• Derivative product

• Cash market product

• Money market instrument

A calendar spread contract in index futures attracts ___________

• Same margin as sum of two independent legs of futures contract

• Lower margin than sum of two independent legs of futures contract

• Higher margin than sum of two independent legs of futures contract

• No margin need to be paid for calendar spread positions

Client A has purchased 10 contracts of December series and sold 7 contracts of January series of the NSE Nifty futures. How many lots will get categorized as regular (non-spread) open positions?

• 10

• 7

• 3

• 17

The buyer of an option cannot lose more than the option premium paid.

• True only for European options

• True only for American options

• True for all options

• False for all options

What role do speculators play in the futures market?

• They take delivery of the commodities at expiration

• They produce the commodities traded at futures exchanges

• They add to the liquidity in the futures markets

• They transfer their risk to the hedgers

You sold a Put option on a share. The strike price of the put was Rs 245 and you received a premium of Rs 49 from the option buyer. Theoretically, what can be the maximum loss on this position?

• 196

• 206

• 0

• 49

Current Price of XYZ Stock is Rs 286. Rs. 260 strike call is quoted at Rs 45. What is the Intrinsic Value?

• 19

• 26

• 45

• 0

A European call option gives the buyer the right but not the obligation to buy from the seller an underlying at the prevailing market price "on or before" the expiry date

• True

• False

A put option gives the buyer a right to sell how much of the underlying to the writer of the option?

• Any quantity

• Only the specified quantity (lot size of the option contract)

• The specified quantity or less than the specified quantity

• The specified quantity or more than the specified quantity

An in-the-money option is _____________.

• An option with a negative intrinsic value

• An option which cannot be profitably exercised by the holder immediately

• An option with a positive intrinsic value

• An option with zero time value