Certification Examination
1. An index option is a __________________.
__________________.
Debt instrument
Derivative product [Correct answer NOT selected]
Cash market
Cash market product
Money market instrument
. !he purchase o" a share in one market and the simultaneous sale in a di""erent market to
bene"it "rom price di""erentials is known as ____________.
____________.
Mort#a#e
Arbitra#e [Correct answer NOT selected]
$ed#in#
%peculation
&. 'inancial
&. 'inancial derivatives provide the "acility "or __________.
%peculation
$ed#in#
Arbitra#in#
All o" the above
above [Correct answer NOT selected]
3. /o
/ou have taken a short position o" one contract
contrac t in >une 0/ "utures 9contract multiplier
-7; at a price o" 2s. &6(77. 8hen you closed this position a"ter a "ew days6 you reali5ed that
you made a pro"it o" 2s. 176777. 8hich o" the "ollowin# closin# actions would have enabled
you to #enerate this pro"it= 9/ou may i#nore brokera#e costs.;
%ellin# 1 >une 0/ "utures contract at &77
?uyin# 1 >une 0/ "utures contract at &77
?uyin# 1 >une 0/ "utures contract at &77 [Correct answer NOT selected]
%ellin# 1 >une 0/ "utures contract at &77
4. 8hich o" the "ollowin# is closest to the "orward price o" a share6 i" Cash @rice 2s.3-76
'orward Contract Maturity months "rom date6 Market *nterest rate 1B=
33.-
3- [Correct answer NOT selected]
4(7
(7.4
. *" you have sold a 0/ "utures contract 9contract multiplier -7; at &177 and bou#ht it
back at &&776 what is your #ainloss=
A loss o" 2s. 176777 [Correct answer NOT selected]
A #ain o" 2s. 176777
A loss o" 2s. -6777
A #ain o" 2s. -6777
1. *n an e+uity scheme6 "und can hed#e its e+uity exposure by sellin# stock index "utures.
!rue [Correct answer NOT selected]
'alse
1. !he buyer o" an option cannot lose more than the option premium paid.
!rue only "or Guropean options
!rue only "or American options
!rue "or all options [Correct answer NOT selected]
'alse "or all options
1. /ou sold a @ut option on a share. !he strike price o" the put was 2s.(- and you received
a premium o" 2s.( "rom the option buyer. !heoretically6 what can be the maximum loss on
this position=
1 [Correct answer NOT selected]
7
7
(
7. Current @rice o" 0/ %tock is 2s. 4. 2s. 7 strike call is +uoted at 2s. (-. 8hat is the
*ntrinsic Ialue=
1
[Correct answer NOT selected]
(-
7
1. A european call option #ives the buyer the ri#ht but not the obli#ation to buy "rom the
seller an underlyin# at the prevailin# market price Jon or be"oreJ the expiry date.
!rue
'alse [Correct answer NOT selected]
. A put option #ives the buyer a ri#ht to sell how much o" the underlyin# to the writer o" the
option=
Any +uantity
)nly the speci"ied +uantity 9lot si5e o" the option contract; [Correct answer NOT selected]
!he speci"ied +uantity or less than the speci"ied +uantity
!he speci"ied +uantity or more than the speci"ied +uantity
(. An option with a delta o" 7.- will increase in value approximately by how much6 i" the
underlyin# share price increases by 2s =
2s 1 [Correct answer NOT selected]
2s
2s (
!here would be no chan#e
. $i#her the price volatility o" the underlyin# stock o" the put option6 ______________.
$i#her would be the premium [Correct answer NOT selected]
Eower would be the premium
Fil 95ero; would be the premium
Iolatility does not e""ect put value
3. *n which option is the strike price better than the market price 9i.e.6 price di""erence is
advanta#eous to the option holder; and there"ore it is pro"itable to exercise the option=
)ut<o" the money option
*n<the <money option [Correct answer NOT selected]
At<the<money option
$i#her<the<money option
4. Mr. 0 purchases 177 put option on stock % at 2s. &7 per call with strike price o" 2s. 47.
*" on exercise date6 stock price is 2s. &-76 i#norin# transaction cost6 Mr. 0 will choose
_____________.
!o exercise the option
Fot to exercise the option [Correct answer NOT selected]
May or may not exercise the option dependin# on whether he is in his hometown or not at
that time
May or may not exercise the option dependin# on whether he like the company % or not
. !hree Call series o" 0/ stock < >anuary6 'ebruary and March are +uoted. 8hich will
have the lowest )ption @remium 9same strikes;=
>anuary [Correct answer NOT selected]
'ebruary
March
All will be e+ual
&7. 8hich is the ratio o" chan#e in option premium "or the unit chan#e in interest rates=
Ie#a
2ho [Correct answer NOT selected]
!heta
,amma
&1. *" you sell a put option with strike o" 2s. (- at a premium o" 2s.(76 how much is the
maximum #ain that you may have on expiry o" this position=
4-
(7 [Correct answer NOT selected]
7
7-
&. *" an investor buys a call option with lower strike price and sells another call option with
hi#her strike price6 both on the same underlyin# share and same expiration date6 the strate#y
is called ___________.
?ullish spread [Correct answer NOT selected]
?earish spread
?utter"ly spread
Calendar spread
&&. )n the derivative exchan#es6 all the orders entered on the !radin# %ystem are at prices
exclusive o" brokera#e.
!rue [Correct answer NOT selected]
'alse
&(. A trader has bou#ht 177 shares o" 0/ at 2s.347 per share. $e expects the price to #o up
up but wants to protect himsel" i" the price "alls. $e does not want to lose more than 2s.1777
on this lon# position in 0/. 8hat should the trader do=
@lace a limit sell order "or 177 shares o" 0/ at 2s.337 per share
@lace a stop loss sell order "or 177 shares o" 0/ at 2s.337 per share [Correct answer NOT
selected]
@lace a limit buy order "or 177 shares o" 0/ at 2s.37 per share
@lace a limit buy order "or 177 shares o" 0/ at 2s.337 per share
&-. *nvestor A wants to sell 7 contracts o" Au#ust series at 2s.(-77 and *nvestor ? wants to
sell 13 contracts o" %eptember series at 2s.(--7. Eot si5e is -7 "or both these constracts. !he
*nitial Mar#in is "ixed at B. $ow much *nitial Mar#in is re+uired to be collected "rom both
these investors 9sum o" initial mar#ins o" A and ?; by the broker=
6376777
-6767-7 [Correct answer NOT selected]
6&67-7
(6176777
&. A member has two clients C1 and C. C1 has purchased 477 contracts and C has sold
77 contracts in Au#ust 0/ "utures series. 8hat is the outstandin# liability 9open position;
o" the member towards Clearin# Corporation in number o" contracts=
477
1377 [Correct answer NOT selected]
77
177
&4. ClientsH positions cannot be netted o"" a#ainst each other while calculatin# initial mar#in
on the derivatives se#ment.
!rue [Correct answer NOT selected]
'alse
(1. A penalty or suspension o" re#istration o" a stock broker "rom derivatives
exchan#ese#ment under the %G?* 9%tock ?roker and %ub<broker; 2e#ulations6 1 can take
place i" _______________.
!he stock broker "ails to pay "ees
!he stock broker violates the conditions o" re#istration
!he stock broker is suspended by the stock exchan#e
*n any o" the above situations [Correct answer NOT selected]
(. Clearin# corporation on a derivatives exchan#e becomes a le#al counterparty to all trades
and be responsible "or #uaranteein# settlement "or all open positions.
!rue [Correct answer NOT selected]
'alse
((. Ei+uid Assets maintained by Mr A 9Clearin# Member; are hi#her than that maintained by
Mr ? 9Clearin# Member;. 8hich o" the "ollowin# statements is true=
Mr A can enKoy hi#her exposure levels in "utures than Mr ? [Correct answer NOT selected]
Mr ? can enKoy hi#her exposure levels in "utures than Mr A
?oth Mr A and Mr ? enKoy the same exposure levels
Fo need to maintain li+uid assets "or exposure in derivatives markets
(-. )n the Clearin# Council o" the Clearin# Corporation o" the derivatives se#ment6 broker<
members are allowed.
!rue
'alse [Correct answer NOT selected]
(. !he main obKective o" !rade ,uarantee 'und 9!,'; at the exchan#es is
_________________.
!o #uarantee settlement o" bona"ide transactions o" the members o" the exchan#e
!o inculcate con"idence in the minds o" market participants
!o protect the interest o" the investors in securities
All o" the above [Correct answer NOT selected]
(3. Ialue<at<risk provides the ______________.
Gxpected maximum loss6 which may be incurred by a port"olio over a #iven period o" time
and speci"ied con"idence level [Correct answer NOT selected]
Ialue o" securities which are very risky
Ialue o" speculative stocks
!heoretical value o" illi+uid stocks in a port"olio
(. *" price o" a "utures contract decreases6 the mar#in account o" the buyer o" this "utures
contract is debited "or the loss.
!rue [Correct answer NOT selected]
'alse
-7. 8hen establishin# a relationship with a new client6 the tradin# member takes reasonable
steps to assess the back#round6 #enuineness6 bene"icial identi"y6 "inancial soundness o" such
person and his investment obKectives.
!rue [Correct answer NOT selected]
'alse
51. at maturity of a future contract the spot price and future price must be
approximately the same because of
Marking to market
-. a port"olio o" & million ha sbeta o" 1.(7 a complete hed#e is obtained by _______ .
7.47B
1.7B
buy
hold
exchan#e
All in Lthe Lmoney contracts are exercise automatically on the expiration day. [Correct
answer NOT selected]
--. Ms shetty ha sold 1777 calls on abc ltd at a strike price o" 2s 44- "or a premium o" rs 3
per call on april 1 the closin# price o" e+uity shares o" abc ltd is 2s 47 on that day i" the call
option is assi#ned a#ainst her on that day what is her obli#ation on april 71=
-. clearin# members in ') se#ment are monitored by F%CCE )n the real time basis "or
_______.
2ulNes violation
-3. to calculate the mimimum net worth o" derivative clearin# members the non allowabke
assets includes
@led#ed securities members card
-4. daily settlement mark to market mar#in o" e+uity index "utures should be credited
debited to
Mark to market mar#in Le+uity index "utures account [Correct answer NOT selected]
-. which o" the "ollowin# exchan#es was the "irst to start tradin# "inancial "utures
7.the Chica#o board o" the trade was "ormed primarilt "or
@rovidin# a centralised location "or buyers and sellers to ne#otiate "orward contract in
commodities. [Correct answer NOT selected]
1. i" the annual risk "ree rate is 11B then r used in the black schools "ormula should be
7.17([Correct answer NOT selected]
. the current level o" the %@ CF0 Fi"ty is -(77 the annual dividend yield on the %@
CF0 is -B the annual risk "ree intrest rate is B the "air "uture price "or a contract on the
%@ CF0 Fi"ty due to expire & months "rom now should be Ans. -(1(
They have reasonable basis for belivinh that the cutomer has knoledge and
)nancial experience
They have reasonable basis for beliving that the cutomer is applicable of
exaluating and )nancially able to bear the risk of the transaction
3. investors sell call and put option o" the same strike price and same expiry strate#y is
known as
%hort straddle
Pnlimited
. suppose ni"ty is at -(-7 on 3 th april an investor mr a enters into a short straddle by
sellin# a may rs --77 ni"ty put "or rs 4- and a may rs --77 ni"ty call "or rs 1 what is
maximum pro"it in this strate#y =
+,. . suppose ni"ty is at --77 in may an investor mr a executes a lon# stran#le by buyin# a rs
-&77 ni"ty put "or a premium o" rs & and a rs -377 ni"ty call "or rs (& what is the net payo""
i" ni"ty close at -477 on expiry
31. %uppose ni"ty is at -477 in Fovember an investor Mr ram execute a short stran#le by
sellin# a rs -77 ni"ty put "or a premium o" rs ( and rs 777 ni"ty call "or rs 47 what will be
his maximum pro"it by this strate#y
1(( [Correct answer NOT selected] maximum pro"it on short stran#le is total premium
recived 9(:471((;
3. i" an investor has an short term neutral to moderately bullish view on the stock he holds
what optn strate#y he will apply
3&. mr a bou#ht xy5 ltd "or rs 77 nad simultaneously sell a call option at a strike pice o" rs
- what will be his ?G@=
-&- 9bep stock price Lcall premium recived; [Correct answer NOT selected]
3(. a collar strate#y is an extension o" covered call strate#y in this statement is "alse=