NISM Series 8 Equity Derivatives Free Mock Test

1. The type of volatility which is derived from the option price and indicates the volatility expected over the life of the option is termed as ____________.

2. The main objective of Trade Guarantee Fund (TGF) at the exchanges is ___________

3. You have taken a short position of one contract in June XYZ futures (contract multiplier 50) at a price of Rs. 3,400. When you closed this position after a few days, you realized that you made a profit of Rs. 10,000. Which of the following closing actions would have enabled you to generate this profit? (You may ignore brokerage costs.)

4. Which of the following is a hedged position?

5. An in-the-money option is _____________.

6. What role do speculators play in the futures market?

7. A long position in a CALL option can be closed by taking a short position in PUT option.

8. Three Call series of XYZ stock - January, February and March are quoted. Which will have the lowest Option Premium (same strikes)?

9. Put-call parity refers to the relationship between: ________.

10. The intrinsic value is the difference between Market Price and Strike Price of the option and it can never be negative.

11. Which is the ratio of change in option premium for the unit change in interest rates?

12. Mr. X purchases 100 put option on stock S at Rs 30 per call with strike price of Rs280. If on exercise date, stock price is Rs 350, ignoring transaction cost, Mr. X will choose ________

13. Financial derivatives provide the facility for __________.

14. Mr. Ashu has bought 100 shares of ABC at Rs 980 per share. He expects the price to go up but wants to protect himself if price falls. He does not want to lose more than Rs. 1000 on this long position in ABC. What should Mr. Ashu do?

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

16. Initial margin is calculated based on ______

17. Exchange traded options are _______________.

18. ________ is a deal that produces profit by exploiting a price difference in a product in two different markets.

19. When the near leg of the calendar spread transaction on index futures expires, the farther leg becomes a regular open position.

20. A trader buys a call and a put option of same strike price and same expiry. This is called as ________

21. A stock exchange has ON LINE SURVEILLANCE capability to monitor the ________

22. Which of the following measures was introduced by SEBI to prevent brokers from allowing excessive intraday leverage to their clients?

23. A penalty or suspension of registration of a stock broker from derivatives exchange/segment under the SEBI (Stock Broker) Regulations, 1992 can take place if _____

24. Cost of carry model states that ______________.

25. Which of the following situations indicates a bullish trend in the underlying?

26. All the orders entered on the Trading System of a Derivative Exchange are at Prices exclusive of brokerage. True or False?

27. A buyer of Call Option -

28. Operational risks include losses due to ____________.

29. Impact cost is low when the liquidity in the system is poor.

30. Mr R wants to sell 17 contracts of January series at Rs.4550 and Mr S wants to sell 20 contracts of February series at Rs. 4500. Lot size is 50. The Initial Margin is fixed at 9%. How much Initial Margin is required to be collected from both these investors by the broker?

31. When establishing a relationship with a new client, the trading member takes reasonable steps to assess the background, genuineness, beneficial identify, financial soundness of such person and his investment/trading objectives.

32. A calendar spread will attract _______ margin.

33. Of the below mentioned options, which would attract margins?

34. On the Clearing Council of the Clearing Corporation of the derivatives segment, broker-members are allowed.

35. Who is eligible for clearing trades in index options?

36. A member has two clients Rohit and Mohit. Rohit has purchased 100 contracts and Mohit has sold 300 contracts in March Tata Steel futures series. What is the outstanding liability (open Position) of the member towards Clearing Corporation in number of contracts?

37. The purchase of a share in one market and the simultaneous sale in a different market to benefit from price differentials is known as ____________.

38. Fixed deposits and Bank guarantees are NOT permitted to be offered by Clearing Members to the Clearing corpn as part of liquid assets - State whether True or False?

39. Mark-to-market margins are collected ___________.

40. Profits from derivatives transactions for Indian investors are taxed as: __________.

41. Trader A wants to sell 20 contracts of August series at Rs 4500 and Trader B wants to sell 17 contracts of September series at Rs 4550. Lot size is 50 for both these contracts. The Initial Margin is fixed at 6%. How much Initial Margin is required to be collected from both these investors (sum of initial margins of A and B) by the broker?

42. You sold one XYZ Stock Futures contract at Rs. 278 and the lot size is 1,200. What is your profit (+) or loss (-), if you purchase the contract back at Rs. 265?

43. In the KYC process, Politically Exposed Persons are termed as:

44. Clients' positions cannot be netted off against each other while calculating initial margin on the derivatives segment.

45. On the derivative exchanges, all the orders entered on the Trading System are at prices exclusive of brokerage.

46. A calendar spread contract in index futures attracts ___________.

47. A portfolio of Rs 25 lacs has a beta of 1.20. A complete hedge is obtained by __________

48. If you sell a put option with strike of Rs 245 at a premium of Rs.40, how much is the maximum gain that you may have on expiry of this position?

49. Selling short a stock means ___________.

50. 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.

51. Which of the following statements about interoperability of clearing corporations is TRUE?

52. Value-at-risk measures ___________.

53. Higher the price volatility of the underlying stock of the put option, ___________.

54. If price of a futures contract decreases, the margin account of the buyer of this futures contract is debited for the loss.

55. Which of the following options on ABC Ltd stock with a strike price of Rs.500 has the highest time value?

56. A trader sells a lower strike price CALL option and buys a higher strike price CALL option, both of the same scrip and same expiry date. This strategy is called _______

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

58. If an investor buys a call option with lower strike price and sells another call option with higher strike price, both on the same underlying share and same expiration date, the strategy is called ___________.

59. If the lot size of Reliance Industries future contract is 500 shares, what will be the lot size of its Option contract?

60. _________ is allotted on client onboarding and serves as an exclusive identification of the client.

61. If one does a calendar spread contract in index futures, then it attracts ___________

62. Clearing corporation on a derivatives exchange becomes a legal counterparty to all trades and be responsible for guaranteeing settlement for all open positions.

63. When compared to cash market, there are more chances that an investor does not properly understand the risks involved in the derivatives market. True or False?

64. _______ is a deal that produces profit by exploiting a price difference in a product in two different markets.

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

66. You sold a Put option on a share. The strike price of the put was Rs245 and you received a premium of Rs 49 from the option buyer. Theoretically, what can be the maximum loss on this position?

67. Mr A buys an August futures contract of ICICI Bank at Rs 500. On the last Thursday of the month i.e., expiry, the last traded price in August futures is Rs 512 and the closing price in cash / spot market is Rs 510. What is the profit / loss of Mr if his position is sq-up by the exchange? Market lot of ICICI Bank is 250.

68. Value-at-risk provides the ______________.

69. In which option is the strike price better than the market price (i.e., price difference is advantageous to the option holder) and therefore it is profitable to exercise the option?

70. When you buy a put option on a stock you are owning, this strategy is called ________

71. The Spot price i.e., the market price of a share is Rs 200 and the interest rate is 12% pa. Which of the below price is closest to 3 months future maturity?

72. Under the Anti-Money Laundering (AML) and Combating of Financial Terrorism (CFT) regulations, suspicious transactions must be reported to ___________.

73. If the price of a stock is volatile, then the option premium would be relatively _______

74. A defaulting member's clients’ positions could be transferred to ____________ by the Clearing Corporation.

75. Initial margin collection is monitored by the _________.

76. An option with a delta of 0.5 will increase in value approximately by how much, if the underlying share price increases by Rs 2?

77. Which of the following is closest to the forward price of a share, if Cash Price = Rs.750, Forward Contract Maturity = 6 months from date, Market Interest rate = 12%?

78. If you have sold a XYZ futures contract (contract multiplier 50) at 3100 and bought it back at 3300, what is your gain/loss?

79. A trader Mr. Raj wants to sell 10 contracts of June series at Rs.5200 and a trader Mr. Rahul wants to buy 5 contracts of July series at Rs. 5250. Lot size is 50 for both these contracts. The Initial Margin is fixed at 10%. They both have their accounts with the same broker. How much Initial Margin is required to be collected from both these investors by the broker?

80. Liquid Assets maintained by Mr A (Clearing Member) are higher than that maintained by Mr B (Clearing Member). Which of the following statements is true?

81. The margining system for index futures is based on _______

82. Which of the following costs is not actually paid by the market participants but arises due to lack of liquidity?

83. All the trades and open positions on a derivative exchange are guaranteed by the Clearing Corporation and it becomes a legal counterparty.

84. 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?

85. If the liquid assets maintained by clearing member Mr. Ram are higher than that clearing member Mr. Shyam, which of the below options is/are true?

86. Margins in 'Futures' trading are to be paid by _______.

87. An index option is a __________________.

88. An investor, who is anticipating a broad stock market fall, but is not willing to sell his entire portfolio of stocks, can offset his potential losses by shorting a certain number of Index futures.

89. SCORES is: __________.

90. A member has two clients C1 and C2. C1 has purchased 800 contracts and C2 has sold 900 contracts in August XYZ futures series. What is the outstanding liability (open position) of the member towards Clearing Corporation in number of contracts?

91. Mr. Kailash has bought 200 shares of ABC Industries Ltd. at Rs.850 per share. He expects the price to go up but wants to protect himself if the price falls. He does not want to lose more than Rs. 4000 on this long position. What should he do?

92. A trader has bought 100 shares of XYZ at Rs 780 per share. He expects the price to go up but wants to protect himself if the price falls. He does not want to lose more than Rs1000 on this long position in XYZ. What should the trader do?