Font size
WorksheetsPASS4SURE PRACTICE QUESTIONS SET NO. 4
Total questions: 58
Worksheet time: 29mins
The mark-to-market margin debits for stock futures are done on a daily basis but the mark-to-market margin credits are done on a weekly basis - State whether True or False?
True
False
Tick size is ________.
Contract Lot size
Average of the high and low prices
The maximum permitted movement in the price of the contract
The minimum permitted movement in the price of the contract
A forward contract is ________.
is a type of Option
is settled and cleared through a Clearing Corporation
a bilateral commitment of trade between two parties
is entered through an Exchange
How many shares should be ideally there in an index?
Depends on the objective of the index
Around 100 to comprehensively cover all sectors
Exactly 50
Below 50
Generally, final decision of inclusion or removal of a security from the index is taken by a specialized committee known as ________.
Index Committee
Audit Committee
Risk Management Committee
Investment Committee
Longer the time to maturity of the PUT option, higher will be the time value - State whether True or False?
True
False
Brokers and dealers of derivative exchanges have also to be registered with SEBI in addition to their registration with stock exchange - State whether
True
False
As a Call option moves more Out-Of-The-Money, the absolute value of Delta will ______.
Increase
Decrease
Not change
None of the above
Counterparty risk can also be called as ________.
Credit Risk
Default Risk
Both 1 and 2
Speculative Risk
A penalty or suspension of registration of a stock broker from derivatives exchange/segment under SEBI (Stock Broker and Sub-broker) Regulations, 1992 can take place if
The stock broker fails to resolve the complaints of the investors
The stock broker indulges in manipulating, or price rigging or cornering of the market
The stock broker does not follow the code of conduct
All of the above
At the time of final settlement, the seller / writer of the option will recognize the adverse difference he paid to the buyer as ____ in his profit and loss account.
B) Loss
A) Income
C) Asset
D) Revenue
Its duty of the Clearing Corporation to continuously analyse and modify the initial margin requirements as the stock markets tend to be very volatile - State whether
True
False
Is the duty of the Clearing Corporation to continuously analyse and modify the initial margin requirements as the stock markets tend to be very volatile?
False
True
Fixed deposits and Bank guarantees are NOT permitted to be offered by Clearing Members to the Clearing Corporation as part of liquid assets - State whether True or False?
True
False
The absolute amount of minimum capital adequacy requirement for derivative clearing member is higher than that of spot (cash) market - State whether True or False?
True
False
At price level of Rs. 6900, what will be the value of one lot of ABC futures contract (contract multiplier 50)?
Rs. 289000
Rs. 690000
Rs. 345000
Rs. 460000
What will be the value of one lot of ABC futures contract if the price is Rs. 3200 and the contract size is 150?
Rs. 240000
Rs. 320000
Rs. 480000
Rs. 345000
In the derivatives market, the mark to market margin is equal to the initial margin?
True
False
Q17. Which of these strategies is not a HEDGE?
Arbitrage
Covered Call
Protective Put
Currency Forward
Which of these strategies is not a HEDGE?
Ms. Agarwal is bullish on the market and so she buys an Out-of-the-money index call and sells an out-of-the-money index put option
A trader with a short index futures position buys an out-of-the-money call on the index so as to limit his loss
An importer is expecting to send dollars after 1 month, takes a long position in one-month USDINR futures to lock in his dollar price
A fund manager is expecting market volatility after RBI policy, buys index put options to limit the loss on his portfolio
A call option gives its holder the right to buy 'any quantity' of the underlying asset from the writer of the call option at a pre-specified price - State True or False?
True
False
Losses incurred on derivative transactions on a 'recognized stock exchange' can be carried forward to ______ subsequent assessment year and set off against any other non-speculative business income of the subsequent year.
8
4
6
10
The price at which the underlying asset can be bought or sold on exercise of an option is called ________.
Strike Price
Market Price
Premium
Settlement Price
In an 'Opening Buy Transaction' the effect will be that of creating or increasing _____
Arbitrage position
Cross position
Long position
Short position
The initial margin in derivatives market depends on the volatility of the underlying market. Usually _______.
higher the volatility, higher the initial margin
higher the volatility, lower the initial margin
lower the volatility, higher the initial margin
volatility does not affect initial margin
The initial margin in derivatives market depends on the volatility of the underlying market. Usually ________.
Higher the volatility, Lower the initial margin
Higher the volatility, Higher the initial margin
Lower the volatility, Higher the initial margin
None of the above
In general terms, if the number of participants in a market are more, the liquidity will be low - State True or False?
True
False
All types of investors should allot some portion of their portfolio to derivative products in order to increase the portfolio returns irrespective of their risk tolerance levels - State True or False?
True
False
If the interest rate increases, the premium on CALL option will also increase - State True or False?
True
False
The Clearing Corporation gives exposure limits to Clearing Members based on the number of Trading Members using the services of that Clearing Member.
True
False
In derivative exchanges, the exposure amount possible for each member broker is linked to the amount of deposits / margins kept by the member with the clearing house?
True
False
In derivative exchanges, the exposure amount possible for each member broker is linked to the amount of deposits / margins kept by the member with the clearing house?
True
False
Which of these is/are true for Unsystematic Risk?
Unsystematic Risk is related to risk in a specific security and not pertaining to overall market
Unsystematic Risk can be reduced through diversification
Both 1 and 2
None of the above
How can risk be controlled in the derivatives segment by the stock exchange?
By implementing a effective margin system
By having a well organized control systems and audit procedures
By periodic evaluation of member positions
All of the above
In the derivative segment, once initial margin requirement is fixed, it cannot be changed by the exchange, during the lifetime of the futures contract.
True
False
What happens to the unmatched portion of the order in an Immediate or cancel (IOC) order?
It will be added to the order book as a limit order
It will be executed on the next trading day
It will be executed in the next one hour
It will be cancelled
What should be the market-wide position limit for a stock for it to be eligible for launch in the futures and options contracts in the exchange traded equity derivatives segment in India?
At least Rs. 100 crores
At least Rs. 500 crores
At least Rs. 1000 crores
At least Rs. 1500 crores
When an investor gives instruction to his broker to buy a certain number of contracts at or below a specific price, the order is called as _________.
Market Order
Arbitrage Order
Spread Order
Limit Order
Under which Act / Regulations is the Suspicious Transaction reporting required?
SEBI Insider Trading Regulations
Foreign Account Tax Compliance Act (FATCA)
Anti-Money laundering (AML) and Combating of Financial Terrorism (CFT) Regulations
Foreign Exchange Management Act (FEMA)
Why are the margins for calendar spreads in index futures low?
Because calendar spreads are not traded on an Exchange
Because calendar spreads are OTC transaction
Because the market risk is low in calendar spreads
Because calendar spreads are special transactions guaranteed by RBI
A hedger wants to offset the price risk on his equities, so he will take _________.
A long positions in futures
A short positions in futures
A long position in short position in futures
Both a long or short position in futures
In the Option segment, if you buy a CALL at a premium of Rs 36 at the Strike Price of Rs 400, lot is of 200 shares, then the maximum possible profit is _______.
Rs 400
Rs 7000
Rs 43000
Unlimited
Who can trade in derivative products?
Any broker who is registered with SEBI can trade in derivative products
Any broker who is registered with SEBI for trading in derivatives products can trade in derivatives
Any member of a registered Stock Exchange
All of the above
A Call Option will give the holder of the option a right to buy how much of the underlying from the writer of the option?
The specified quantity or more than the specified quantity
The specified quantity or less than the specified quantity
Only the specified quantity
Those contracts which have been initiated but are not yet offset by a subsequent sale or purchase or by making or taking delivery are considered as _______.
Offsetting Positions
Clear Positions
Open Positions
Squared-off Positions
As per SEBI's guidelines, derivatives trading takes place through _______.
Online screen based trading system
Kerb trading
Auction public amts
As per SEBI's guidelines, derivatives trading takes place through ______.
Online screen based trading system
Kerb trading
Auctions at public mandis
Open outcry method in the trading ring
Ms. Seema, a stock market trader, is very bearish on specific companies. However she is bullish on the market as a whole. Identify the most appropriate strategy to take advantage from this view?
She should sell shares of those specific companies and buy index futures
She should buy the shares of those specific companies and also sell index futures
She should buy the shares of those specific companies and sell index futures
She should not do anything
Why is the Clearing Corporation considered very important in the derivatives market?
Clearing Corporation deals with exchanges
Clearing Corporation related with stocks
Clearing Corporation provides settlement guarantee and assumes role of counterparty for each trade
Clearing Corporation collects margins from members
A client has asked for a quarterly settlement of his running account. In this connection, identify the INCORRECT statements.
Both B and C are incorrect
Both A and B are incorrect
The settlement will be done on any trading day of the quarter
The settlement will be done on last Friday of the quarter
The settlement will be done on first Friday of the quarter
Identify the CORRECT statement.
Penny stocks are good investment options for senior citizens
Brokers of a stock exchange are not expected to disclose the investment risks to their clients
Low income families can use derivatives instruments to get rich quickly
Sales agents of the brokers should not use high pressure luring tactics
Complete the sentence: Shorter the time to expiry of a PUT Option, lesser will be its _______.
Assignment Value
Time Value
Intrinsic Value
Settlement Value
A derivatives market would primarily have which of the following participants?
Speculators
Long-term investors
Hedgers
Both Speculators and Hedgers
Which of these is NOT included in the Indian equity derivatives market?
Options on individual stocks
Options on equity market indices
Futures on individual stocks
Interest rate futures
For calculating the net worth of a clearing member, which of these is/are NOT considered?
His Fixed Assets
His pledged securities
His membership card
All of the above
Which of these is NOT included in the Indian equity derivatives market?
Options on individual stocks
Options on equity market indices
Futures on individual stocks
Interest rate futures
For calculating the net worth of a clearing member, which of these is/are NOT considered?
His Fixed Assets
His pledged securities
His membership card
All of the above
In ________, the strike price and market price are equal.
Out-of-the-money option
Same-the-money option
At-the-money option
In-the-money option
