Scribd
Upload
150 views15 pages

Test No 7

Uploaded by

udhay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
150 views15 pages

Test No 7

Uploaded by

udhay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
You are on page 1/ 15
A PASSQESURE) 11:00: 1-cxaroamames cnmervon EXAM ~ PRACTICE TEST NO. 7 RACTICETEST NO. ie 2 Question —_—_Long Stradale ts a strategy of, @ Unlimited profits and limited losses o Unlimited profits and unlimited losses © Limited profits and limited losses @ Limited profits and unlimited losses Question2 —_Niffty is currently at 4900. An investor feels Nifty will not rise beyond 5000 in the next three ‘months. He sells two Nifty calls of strike price 4900 at Rs 100 per lot. Because of positive indicators Nifty rises to 4950 on expiry day. What ts his profit/loss ? (1 lot = 50 shares) @ Profit of Rs 5000 o) Loss of Rs 5000 © Profit of Rs 10000 @ Loss of Rs 10000 Unlimited profits and limited losses ‘ Answer ‘A long straddle position is created by buying a call and a put option of same strike and same Explanation —_ expiry, His maximum loss will be equal to the sum of these two premiums paid. ‘Any significant move in either direction will result in handsome profits. Correct Answer 2 Profit of Rs 5000 Answer The investor sells 2 Nifty calls at Rs 100. Explanation _ So he receives premium of Rs 100 x 2 lots x 50 (lot size) = Rs 10,000 He had a negative outlook on Nifty but Nifty rose, so he will incur a loss. 4900 - 4950 = Rs 50 Loss Rs. 50 x2 Lots x 50 (lot size) = Rs 5000 So Net he is in a profit : 10,000 - 5000 = Rs 5000 f Copyright © WWW.PASS4SURE.IN A PASS QESURE) 10:0 -sascv ore crmcaon EXAM — PRACTICE TEST NO. 7 ne Question 4 @ © @ In any of the above situations Ss a8 Intrinsic value of an OUT OF MONEY option is___ 3 zero 1 a none of the above 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 violates the conditions of registration ‘The stock broker fails to pay fees The stock broker is suspended by the stock exchange In any of the above situations Copyright © WWW.PASS4SURE.IN A PASS@ SURE) 'NISM SERIES Vill - EQUITY DERIVATIVES CERTIFICATION EXAM - PRACTICE TEST NO. 7 a es a8 Question 5 ‘An ‘authorised person’ in the Futures & Options segment is @ ‘a person authorised by the exchange as an approved user of a trading member o any person who is acting in any capacity on behalf of the trading member or a participant for activity relating to the trades done and executed 4 © ‘an approved user of a participant @ all of the above Question 6 A butterfly spread is an extension of strategy, @ Covered call o Long straddle © Short straddle @ Long Strangle Correct Answer 5 all of the above Answer ‘The downside in short straddle is unlimited if market moves significantly in either direction. Explanation So to puta limit to this downside, along with short straddle, trader buys one out of the money call ! . and one out of the money put. This strategy is called “Butterfly Spread”. : i Correct Answer 6 Short straddle Copyright © WWW.PASS4SURE.IN + PASS@ SURE) NISM SERIES Vill ~ EQUITY DERIVATIVES CERTIFICATION EXAM - PRACTICE TEST NO. 7 B o 8 Question7 _In the derivatives segment , Cllents' positions cannot be netted off against each other while calculating initlal margin - True or False ? @ FALSE o TRUE Questions After SPAN has scanned the 16 diferent scenarios of underiying market price and ve lass. changes, it selects the @ Average Loss © Smallest Loss © Largest Loss @ Medium Loss Copyright © WWW.PASS4SURE.IN A PASS@ SURE) \NISM SERIES Vill - EQUITY DERIVATIVES CERTIFICATION EXAM -~ PRACTICE TEST NO. 7 ere ee a o 8 Question9 —_—If you sell a put option with strike of Rs. 375 at a premium of Rs.50, how much is the maximum gain that you may have on expiry of this position? @ Unlimited o Rs 50 © Rs 325 @ None of the above Question 10 being anticipated profit shotild be'ignored and no credit for t? same should be taken in the profit and loss account. 6 @ Credit balance in the "Mark-to-Market Margin Account” o Debit balance in the "Mark-to-Market Margin Account” © Debit balance in the Initial Margin A/c @ Credit balance in the Initial Margin A/c Correct Answer 9 _Rs'50 : Answer Seller of an option - be it Call or Put receives the premium and that shall be his maximum profit. Correct Answer 10 Credit balance in the "Mark-to-Market Margin Account” Answer As per the rules of Accounting for open interests as on the balance sheet date : Explanation —_Net amount received (represented by credit balance in the "Mark-to-Market Margin Account") bing etc peli sok be gee med cei the sem she bak i Dg and loss account. Copyright © WWW.PASS4SURE.IN VPASSQLSURE) © :21200- sas xmnescneon EXAM ~ PRACTICE TEST NO. 7 tee | ‘eo os Question 11. Which statement is false with respect to Futures market ? @ ‘There is daily settlement o ‘There are standardised contract terms © ‘No margin payment is required @ ‘Traded on organised exchanges Question 12 of the option is the one who by paying the option premium buys the righ not the obligation to exercise his option on the seller: ri @ Buyer o Seller © Buyer or Seller @ None of the above _ Copyright © WWW.PASS4SURE.IN + PASS QLSURE) 220000 :y0 2200s cece mast a ee Question 13. Intrinsic value of an Out of the Money option is @ 1 © a o zer0 @ None of the above Question 14 Around 60% of the trading volume on the American Stock Exchange Is from @ Index Futures o Index Funds o ETFs @ Index Options Answer An Out of the Money option has no intrinsic value and it cannot be negative. Correct Answer 14 ETFs Answer ETF - Exchange Traded Funds Copyright © WWWPASS4SURE.IN A PASS QLSURE) 120221 eccmnvecarsesvon EXAM ~ PRACTICE TEST NO. 7 a ‘Question 15 @ @) © @ Question 16 @ ® a a6 ‘Spot value of Reliance Industry share is Rs 800 and an investor buys one month Reliance call option of strike price 820 at a premium of Rs 3. The option is, In the Money ‘At the Money Out of the Money Deep In the Money As per the recommendations of the L.C.Gupta Committee, CROSS MARGINING (which takes into account the combined position in the cash and derivative market) is currently not permitted. FALSE TRUE Out of the Money ‘When the Strike price of a call option is higher than the Spot price, its Out of the Money. There is} ‘no intrinsic value but only time value. TRUE AAs per the major recommendations of the L.C.Gupta Committee - Cross margining (linking ‘overall cash and derivative positions for margining) is not permitted. Copyright © WWW.PASS4SURE.IN A PASSQ@ SURE) NISM SERIES Vill ~ EQUITY DERIVATIVES CERTIFICATION EXAM ~ PRACTICE TEST NO. 7 (Question 17 @ ) © @ Question 18 @ ) oO @ An option with zero intrinsic value is called ___ OTM - Out of The Money option ATM-- At The Money option ITM - In The Money option Both - At The Money and Out of The Money options ______ measures the sensitivity of the option valite to a given small change in the price of the underlying asset. Delta Theta Rho Vega Both - At The Money and Out of The Money options Only in-the-money options have intrinsic value whereas at-the-money and out-of-the-mom ] () options have zero intrinsic value. The intrinsic value of an option can never be negative. Della ‘The most important of the ‘Greeks’ is the option’s is “Delta”. This measures the sensitivity of the option value to a given small change in the price of the underlying asset. It may also be seen as the speed with which an option moves with respect to price of the underlying asset. Delta = ‘Change in option premium/ Unit change in price of the underlying asset. Delta for call option buyer is positive. This means that the value of the contract increases as the share price rises. For example, with respect to call options, a deta of 0.6 means that for every Rs.1 the underlying stock ; increases, the call option will increase by Rs 0.60 ut option deltas, on the other hand, will be negative, because as the underlying security increases, the value of the option will decrease. So a put option with a delta of -0.6 will decrease by Rs.0.60 for every Rs 1 the underlying increases in price. i ‘The knowledge of delta is of vital importance for option traders because this parameter is heavily,’ used in margining and risk management strategies. Copyright © WWW.PASS4SURE.IN A PASSA SURE) 1 :2000-:2mrocmnnescommesrn EXAM ~ PRACTICE TEST NO. 7 | ‘Question 20 @ ®) © os a8 A stock exchange has ON LINE SURVEILLANCE capability to monitor the Volumes: Prices Positions All of the above Theta is is the change in option price given a one percentage point change in the risk-free interest rate ‘a measure of the sensitivity of an option price to changes in market volatility the change in option price given a one-day decréase in.time to expiration. speed with which an option moves with respéct to price of the underlying asset. 11 Copyright © WWW.PASS4SURE.IN APASSQLSURE) 21 :020- 120 ccmmrs commer EXAM ~ PRACTICE TEST NO. 7, i Question 21. The basic test of whether a trade done in the future market Is for hedging or speculation is centered on the premise that there already exist a related commercial position which is ‘exposed to the risk due to price fluctuations. @ TRUE o FALSE Question 22 The options which are traded on a exchange are standardised. @ TRUE ) FALSE Y Correct Answer 21. TRUE ‘, ‘you will sell your stock at a set price, therefore avoiding market fluctuations. Answer ‘Hedgeing basically means making an investment to reduce the risk of adverse price movements | Explanation —_in an asset. Normally, a hedge consists of taking an offsetting position in a related security,” such as a futures contract. 12 : ‘An example of a hedge would be if you owned a stock, then sold a futures contract stating Correct Answer 22. TRUE. ; Answer Exchange traded options are standardised as per the rules of the exchange in terms of time, i Explanation duration, quantity etc. i Forward options are customised as per the agreement between the trading parties. F Copyright © WWW.PASS4SURE.IN “PASS Pima aiemaaiesie EXAM ~ PRACTICE TEST NO. 7 a a 5B Question 23 ‘You are long in ICICI Bank Ltd futures at price Rs 1000. The prices rises to Rs 1020 next day. The Mark to Market margin will be credited to your account. True or False ? @ FALSE, o ‘TRUE Question 24 The networth of clearing members does not include — @ Bad Deliveries o) Doubtful Debts © Unlisted Securities @ Allof the Above Correct Answer 24 Alllof the Above Answer ‘The Minimum networth for clearing members of the derivatives clearing corporatiowhouse Explanation shall be Rs.300 Lakhs. The networth of the member shall be computed as follows: - Capital + Free reserves ~ Less non-allowable assets which are : : o Fixed assets ; o Pledged securities i oMember’s card £ © Non-allowable securities (unlisted securities) Copyright © WWW.PASS4SURE.IN

You might also like