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WorksheetsOption Futures and Derivatives
Total questions: 20
Worksheet time: 10mins
Imagine you are the promoter of a gold mining company, to hedge yourself against the fluctuation in gold price the most likely transaction that you will undertake is:
Sell gold futures
Buy gold futures
Buy gold call options
Sell gold put options
If volatility increases the most likely impact on the option premium will be:
The premium will increase
The premium will decrease
The premium will remain unchanged
None of the above
An in the money option most likely behaves like a:
A future contract
A hedged position
Insufficient information
A short position
You are an exporter and expect payment form you client from the United States. Your expectation is that the USDINR will most likely appreciate, the most likely transaction that you will undertake to maximize profit is:
Sell USDINR forward contract
Buy USDINR forward contract
Do nothing
Buy USDINR put option
Which among the following setup exposes you to maximum risk:
Buying call option
Buying put option
Buying a futures contract
Selling a put option
A backwardation is:
When spot price is lower than the futures price
When spot price is higher than the futures price
When spot price and futures price both are same
None of the above
You bought the share of ABC Limited at a price of ₹150, and at the same time you also sold a call option of the same company with a strike price of ₹150, currently the price of the stock is ₹250. The profit that you are earning in the trade is:
₹150
₹200
₹0
₹100
As per the “Comprehensive Guidelines on derivatives” issued by RBI, the responsibility of ‘Customer Appropriateness and Suitability’ review is on the:
Market maker
User
PD's only
Corporates
Select the CORRECT statement:
An American option can be exercised any-time prior to expiration
A European option can be exercised any-time prior to expiration
Both American and European options can be exercised any-time prior to expiration
None of the above
As the time to expiration of an option reduces the option premium:
Increases
Decreases
Remains unchanged
None of the above
Consider two call options of the stock ABC Limited with strike price ₹100 and ₹120. The current price of the stock is ₹70. Assume that the option premium of the call option for strike price ₹100 and ₹120 is P1 and P2 respectively, then most likely:
P1=P2
P1>P2
P1<P2
None of the above
As the spot price of the stock approaches the strike price of a call option, then:
The option premium increases
The option premium deceases
The option premium remains the same
None of the above
The main difference between a future and forward contract is:
A future contract is an OTC product while a forward contract is exchange product
A future contract is non-standardized while forward contract is standardized
A future contract is standardized while forward contract is non-standardized
None of the above
A straddle is :
Buying call and put option with the same strike price and expiration date
Buying call and put option with different strike price and expiration date
Buying call and put option with the same strike price and different expiration date
None of the above
The delta of an option is defined as:
The rate of change of the time with respect to the price of underlying asset
The rate of change of the option price with respect to the price of underlying asset
The rate of change of the volatility with respect to the price of underlying asset
The rate of change of the vix with respect to the price of underlying asset
As the spot price of a stock approaches the strike price, the delta of the option approaches:
0
1
Infinity
-1
At start of SWAP agreement, the net value of the swap is:
Positive to one-of the counterparty
Negative to one-of the counterparty
Zero
None of the above
A total return swap is:
A financial contract that transfers both the credit risk and market risk of an underlying asset
A financial contract that transfers only the credit risk an underlying asset
A financial contract that transfers only the market risk of an underlying asset
None of the above
A covered call is:
Buying a share and selling call option on it
Buying a share and selling put option on it
Buying a share and call option
None of the above
Imagine that the election results are due to be announced tomorrow, you expect that the market to rise after the declaration of results and hence to cash on the opportunity you buy an index call option. On the result day, the market does rises but you are unbale to make much money in the call option bought by you. The most likely reason for the same is:
Volatility decreases
Volatility increases
Volatility remains unchanged
None of the above
