NISM Exam

Investor A wants to sell 20 contracts of August series at Rs.
4500
and Investor B wants to sell 17 contracts of September series at
Rs.4550. Lot size is 50 for both these constracts. 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?
502050 Formatted: Highlight
270000
410000
232050
On the Clearing Council of the Clearing

Corporation of the derivatives segment, broker-
members are allowed.
FALSE Formatted: Highlight
TRUE
On the Clearing Council of the Clearing
Corporation of the derivatives segment, broker-
members are allowed.
FALSE
TRUE
Selling short a stock means ______________.
Seller does not own the

stock he is supposed to
deliver
Seller owns the stock he
is supposed to deliver
Seller has more than a
year's time to deliver the
stock which he sold
Seller has to deliver the
stock within a short time
Selling short a stock means ______________. Formatted Table
Seller does not own the

stock he is supposed to
deliver
Seller owns the stock he
is supposed to deliver
Seller has more than a
year's time to deliver the
stock which he sold
Seller has to deliver the
stock within a short time
Margins in 'Futures' trading are to be paid by
_______.
The clearing corporation

Only the buyer
Both the buyer and the Formatted: Highlight
seller
Only the seller
What role do speculators play in the futures
market?
They add to the liquidity Formatted: Highlight

in the futures markets
They produce the
commodities traded at futures
exchanges
They take delivery of the
commodities at expiration
They transfer their risk to
the hedgers
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?
205
285
0
Mr. X purchases 100 put option on stock S at Rs.
30 per call with strike price of Rs. 280. If on
exercise date, stock price is Rs. 350 , ignoring
transaction cost, Mr. X will choose _____________.
May or may not exercise

the option depending on
whether he like the company
S or not
To exercise the option
May or may not exercise
the option depending on
whether he is in his
hometown or not at that time Formatted: Highlight
Not to exercise the option
A put option gives the buyer a right to sell how
much of the underlying to the writer of the option?
The specified quantity or

less than the specified
quantity
The specified quantity or
more than the specified
quantity
Any quantity
Only the specified Formatted: Highlight
quantity (lot size of the option
contract)
Operational risks include losses due to
____________.
Income tax regulations

Too much of
management control
Inadequate disaster
planning
Government policies Formatted: Highlight
Exchange traded options are _______________.
Always in-the-money
options
Always out-of-the money
options
Customised options
Standardised options Formatted: Highlight
Who is eligible for clearing trades in index

options?
All members of the stock

exchange
All national level
distributors
All Indian citizens
Only members, who are
registered with the
Derivatives Segment as
Clearing Members
he purchase of a share in one market and the
simultaneous sale in a different market to benefit
from price differentials is known as ____________.
Speculation
Arbitrage Formatted: Highlight
Hedging
Mortgage
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
categorised as regular (non-spread) open
positions?
17
7
10
In an equity scheme, fund can hedge its equity
exposure by selling stock index futures.
FALSE
TRUE Formatted: Highlight
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?
Rs 4
Rs 2
Rs 1 Formatted: Highlight
There would be no chang

Financial derivatives provide the facility for
__________.
Arbitraging
Speculation
Hedging
All of the above
A penalty or suspension of registration of a stock
broker from derivatives exchange/segment under
the SEBI (Stock Broker and Sub-broker)
Regulations, 1992 can take place if
_______________.
The stock broker is

suspended by the stock
exchange
The stock broker violates
the conditions of registration
The stock broker fails to
pay fees
In any of the above Formatted: Highlight
situations
When the near leg of the calendar spread
transaction on index futures expires, the farther
leg becomes a regular open position.
FALSE
Clients' positions can not be netted off against

each other while calculating initial margin on the
derivatives segment.
FALSE
TRUE
The main objective of Trade Guarantee Fund (TGF)
at the exchanges is _________________.
To guarantee settlement
of bonafide transactions of
the members of the exchange
To protect the interest of
the investors in securities
To inculcate confidence
in the minds of market
participants
All of the above Formatted: Highlight
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)
Selling 1 June XYZ

futures contract at 3200
Buying 1 June XYZ Formatted: Highlight
Selling 1 June XYZ
Buying 1 June XYZ
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?
100
900
800
Value-at-risk provides the ______________.
Theoretical value of
illiquid stocks in a portfolio
Value of speculative
stocks
Expected maximum loss, Formatted: Highlight
which may be incurred by a
portfolio over a given period
of time and specified
confidence level
Value of securities which
are very risky
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
_______________.
Calendar spread
Butterfly spread
Bearish spread
Bullish spread Formatted: Highlight
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?
(-)16600
(-)15600
16600
Cost of carry model states that ______________.
Price of Futures = Spot -

Cost of Carry
Price of Futures = Cost
of Carry
Price of Futures = Spot + Formatted: Highlight
Cost of Carry
Price of Futures = Spot
Price
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?
In the money option Formatted: Highlight
Higher the money option

At the money option
Out of the money option
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.
TRUE
A trader has bought 100 shares of XYZ at Rs.780
per share. He expects the price to go up up but
wants to protect himself if the price falls. He does
not want to lose more than Rs.1000 on this long
position in XYZ. What should the trader do?
Place a limit buy order for

100 shares of XYZ at Rs.790
per share
Place a limit sell order for
per share
Place a limit buy order for
per share
Place a stop loss sell Formatted: Highlight
order for 100 shares of XYZ
at Rs.770 per share
Initial margin collection is monitored by the
_________.
Margin office
RBI
SEBI
Clearing Corporation Formatted: Highlight
An index option is a __________________.
Money market instrument

Debt instrument
Cash market product
Derivative product Formatted: Highlight
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%?
795
940.8
840
772.5 Formatted: Highlight
Clearing corporation on a derivatives exchange

becomes a legal counterparty to all trades and be
responsible for guaranteeing settlement for all
open positions.
FALSE
Higher the price volatility of the underlying stock

of the put option, ______________.
Volatility does not effect

put value
Lower would be the
premium
Higher would be the Formatted: Highlight
premium
Nil (zero) would be the
premium
Impact cost is low when the liquidity in the system
is poor.
TRUE
On the derivative exchanges, all the orders entered

on the Trading System are at prices exclusive of
brokerage.
FALSE
If price of a futures contract decreases, the margin
account of the buyer of this futures contract is
debited for the loss.
FALSE
Value-at-risk measures ___________.
Credit rating of an
investor
Networth of an investor
Value of proprietory
portfolio
Risk level of a financial Formatted: Highlight
portfolio
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?
Mr B can enjoy higher

exposure levels in futures
than Mr A
No need to maintain
liquid assets for exposure in
derivatives markets
Mr A can enjoy higher
exposure levels in futures
than Mr B
Both Mr A and Mr B
enjoy the same exposure
levels
A defaulting member's clients positions could be
transferred to ____________ by the Clearing
Corporation.
A suspense account
The Exchange
Error account
Another solvent membe Formatted: Highlight
Which is the ratio of change in option premium for

the unit change in interest rates?
Gamma
Theta
Vega
Rho
Three Call series of XYZ stock - Jan, Feb and
March are quoted. Which will have the lowest
Option Premium (same strikes)?
Feb
March
Jan Formatted: Highlight
All will be equa

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 objectives.
FALSE
An in-the-money option is __________________.
An option with a negative

intrinsic value
An option with a positive Formatted: Highlight
intrinsic value
An option which cannot
be profitably exercised by the
holder immediately
An option with zero time
value
A calendar spread contract in index futures
attracts ___________.
No margin need to be
paid for calendar spread
positions
Same margin as sum of
two independent legs of
futures contract
Higher margin than sum
of two independent legs of
futures contract
Lower margin than sum Formatted: Highlight
of two independent legs of
futures contract
The buyer of an option cannot lose more than the
option premium paid.
True only for American

options
True for all options Formatted: Highlight
True only for European

options
False for all options
If you have sold a XYZ futures contract (contract
multiplier 50) at 3100 and bought it back at 3300,
what is your gain/loss?
A loss of Rs. 5000

A gain of Rs. 10000
A gain of Rs. 5000
A loss of Rs. 10000 Formatted: Highlight
A Series of Forward contract can be also broadly classified as
a. Forward Series
b. Option
c. Swaps
d. Futures
How the future value calculated
Future price multiplied with lot size
Q.1 Theta is also referred to as the _________ of the portfolio [1 Mark]
(a) time decay
(b) risk delay
(c) risk decay
(d) time delay
Q.2 All of the following are true regarding futures contracts except [1 Mark]
(a) they are regulated by RBI
(b) they require payment of a performance bond
(c) they are a legally enforceable promise
(d) they are market to market

Q.3 Clearing Members (CMs) and Trading Members (TMs) are required to collect
upfront initial margins from all their Trading Members/Constituents. [1 Mark]
(a) FALSE
(b) TRUE
Q.4 All open positions in the index futures contracts are daily settled at the [1 Mark]
(a) mark-to-market settlement price
(b) net settlement price
(c) opening price
(d) closing price
Q.5. An American style call option contract on the Nifty index with a strike price of
3040 expiring on the 30th June 2008 is specified as “30 JUN 2008 3040 CA”. [1
Mark]
(a) FALSE
(b) TRUE
Q.6 Usually, open interest is maximum in the _______ contract. [1 Mark]
(a) more liquid contracts
(b) far month
(c) middle month
(d) near month
Q.7 An equity index comprises of ______. [1 Mark]

(a) basket of stocks
(b) basket of bonds and stocks
(c) basket of tradeable debentures
(d) None of the above
Q.8 Position limits have been specified by _______ at trading member, client, market
and FII levels respectively. [1 Mark]
(a) Sub brokers
(b) Brokers
(c) SEBI
(d) RBI
Q.9 An order which is activated when a price crosses a limit is _________ in F&O
segment of NSEIL. [1 Mark]
(a) stop loss order
(b) market order
(c) fill or kill order
Q.10 Which of the following is not a derivative transaction? [1 Mark]
(a) An investor buying index futures in the hope that the index will go up.
(b) A copper fabricator entering into futures contracts to buy his annual requirements
of copper.
(c) A farmer selling his crop at a future date
(d) An exporter selling dollars in the spot market
Q.11 An investor is bearish about ABC Ltd. and sells ten one-month ABC Ltd. futures
contracts at Rs.5,00,000. On the last Thursday of the month, ABC Ltd. closes at
Rs.510. He makes a _________. (assume one lot = 100) [1 Mark]
(a) Profit of Rs. 10,000
(b) loss of Rs. 10,000
(c) loss of Rs. 5,100
(d) profit of Rs. 5,100
Q.12 The interest rates are usually quoted on : [1 Mark]
(a) Per annum basis
(b) Per day basis
(c) Per week basis
(d) Per month basis
Q.13 After SPAN has scanned the 16 different scenarios of underlying market price
and volatility changes, it selects the ________ loss from among these 16
observations [1 Mark]
(a) largest
(b) 8th smallest
(c) smallest
(d) average
Q.14 Mr. Ram buys 100 calls on a stock with a strike of Rs.1,200. He pays a premium
of Rs.50/call. A month later the stock trades in the market at Rs.1,300. Upon exercise,
he will receive __________. [1 Mark]
(a) Rs.10,000
(b) Rs.1,200
(c) Rs.6,000
(d) Rs.1,150
Q.15 There are no Position Limits prescribed for Foreign Institutional Investors (FIIs)
in the F&O Segment. [1 Mark]
(a) TRUE
(b) FALSE
Q.16 In the Black-Scholes Option Pricing Model, when S becomes very large a call
option is almost certain to be exercised [1 Mark]
(a) FALSE
(b) TRUE
Q.17 Suppose Nifty options trade for 1, 2 and 3 months expiry with strike prices of
1850, 1860, 1870, 1880, 1890, 1900, 1910. How many different options contracts will
be tradable? [1 Mark]
(a) 27
(b) 42
(c) 18
(d) 24
Q.18 Prior to Financial Year 2005 – 06, transaction in derivatives were considered as
speculative transactions for the purpose of determination of tax liability under the
Income-tax Act [1 Mark]
(a) TRUE
(b) FALSE
Q.19 ______ is allotted to the Custodial Participant (CP) by NSCCL. [1 Mark]
(a) A unique CP code
(b) An order identifier
(c) A PIN number
(d) A trade identifier
Q.20 An interest rate is 15% per annum when expressed with annual compounding.
What is the equivalent rate with continuous compounding? [1 Mark]
(a) 14%
(b) 14.50%
(c) 13.98%
(d) 14.75%
Q.21 The favorable difference received by buyer/holder on the exercise/expiry date,

between the final settlement price as and the strike price, will be recognized as
___________ [1 Mark]
(a) Income
(b) Expense
(c) Cannot say
(d) None
Q.22 The F&O segment of NSE provides trading facilities for the following derivative
instruments, except [1 Mark]
(a) Individual warrant options
(b) Index based futures
(c) Index based options
(d) Individual stock options
Q.23 Derivative is defined under SC(R)A to include : A contract which derives its
value from the prices, or index of prices, of underlying securities. [1 Mark]
(a) TRUE
(b) FALSE
Q.24 The risk management activities and confirmation of trades through the trading
system of NSE is carried out by _______. [1 Mark]
(a) users
(b) trading members
(c) clearing members
(d) participants
Q.25 A dealer sold one January Nifty futures contract for Rs.250,000 on 15th January.
Each Nifty futures contract is for delivery of 50 Nifties. On 25th January, the index
closed at 5100. How much profit/loss did he make ? [1 Mark]
(a) Profit of Rs. 9000
(b) Loss of Rs. 8000
(c) Loss of Rs. 9500
(d) Loss of Rs. 5000
Q.26 Manoj owns five hundred shares of ABC Ltd. Around budget time, he gets
uncomfortable with the price movements. Which of the following will give him the
hedge he desires (assuming that one futures contract = 100 shares) ? [1 Mark]
(a) Buy 5 ABC Ltd.futures contracts
(b) Sell 5 ABC Ltd.futures contracts
(c) Sell 10 ABC Ltd.futures contracts
(d) Buy 10 ABC Ltd.futures contracts
Q.27 An investor is bearish about Tata Motors and sells ten one-month ABC Ltd.
Futures contracts at Rs.6,06,000. On the last Thursday of the month, Tata Motors
closes at Rs.600. He makes a _________. (assume one lot = 100) [1 Mark]
(a) Profit of Rs. 6,000
(b) Loss of Rs. 6,000
(c) Profit of Rs. 8,000
(d) Loss of Rs. 8,000
Q.28 The beta of Jet Airways is 1.3. A person has a long Jet Airways position of Rs.
200,000 coupled with a short Nifty position of Rs.100,000. Which of the following is
TRUE? [1 Mark]
(a) He is bullish on Nifty and bearish on Jet Airways

(b) He has a partial hedge against fluctuations of Nifty
(c) He is bearish on Nifty as well as on Jet Airways
(d) He has a complete hedge against fluctuations of Nifty
Q.29 Suppose a stock option contract trades for 1, 2 and 3 months expiry with strike
prices of 85, 90, 95, 100, 105, 110, 115. How many different options contracts will be
tradable? [1 Mark]
(a) 18
(b) 32
(c) 21
(d) 42
Q.30 The bull spread can be created by only buying and selling [1 Mark]
(a) basket option
(b) futures
(c) warrant
(d) options
Q.31 A stock broker means a member of_______. [1 Mark]
(a) SEBI
(b) any exchange
(c) a recognized stock exchange
(d) any stock exchange

Q.32 Ashish is bullish about HLL which trades in the spot market at Rs.210. He buys
10 three-month call option contracts on HLL with a strike of 230 at a premium of
Rs.1.05 per call. Three months later, HLL closes at Rs. 250. Assuming 1 contract =
100 shares, his profit on the position is ____. [1 Mark]
(a) Rs.18,950
(b) Rs.19,500
(c) Rs.10,000
(d) Rs.20,000
Q.33 A January month Nifty Futures contract will expire on the last _____ of January
[1 Mark]
(a) Monday
(b) Thursday
(c) Tuesday
(d) Wednesday
Q.34 Which of the following are the most liquid stocks? [1 Mark]
(a) All Infotech stocks
(b) Stocks listed/permitted to trade at the NSE
(c) Stocks in the Nifty Index
(d) Stocks in the CNX Nifty Junior Index
Q.35 In the books of the buyer/holder of the option, the premium paid would be
___________ to â€˜Equity Index Option Premium Accountâ€™ or â€˜Equity Stock
Option Premium Accountâ€™, as the case may be. [1 Mark]
(a) Debited
(b) Credited
(c) Depends
(d) None
Q.36 Greek letter measures a dimension to_______________ in an option position.

Â [1 Mark]
(a) the risk
(b) the premium
(c) the relationship
(d) None
Q.37 An option which gives the holder the right to sell a stock at a specified price at
some time in the future is called a ___________. [1 Mark]
(a) Naked option
(b) Call option
(c) Out-of-the-money option
(d) Put option
Q.38 Trading member Shantilal took proprietary purchase in a March 2000 contract.
He bought 1500 units @Rs.1200 and sold 1400 units @ Rs. 1220. The end of day
settlement price was Rs. 1221. What is the outstanding position on which initial
margin will be calculated? [1 Mark]
(a) 300 units

(b) 200 units
(c) 100 units
(d) 500 units
Q.39 In which year, foreign currency futures based on new floating exchange rate
system were introduced at the Chicago Mercantile Exchange [1 Mark]
(a) 1970
(b) 1975
(c) 1972
(d) 1974
Q.40 The units of price quotation and minimum price change are not standardized
item in a Futures Contract. [1 Mark]
(a) TRUE
(b) FALSE
Q.41 With the introduction of derivatives the underlying cash market witnesses
_______ [1 Mark]
(a) lower volumes
(b) sometimes higher, sometimes lower
(c) higher volumes
(d) volumes same as before
Q.42 Clearing members need not collect initial margins from the trading members [1
Mark]
(a) FALSE
(b) TRUE
Q.43 Which risk estimation methodology is used for measuring initial margins for
futures/ options Market? [1 Mark]
(a) Value At Risk
(b) Law of probability
(c) Standard Deviation
Q.44 The value of a call option ___________ with a decrease in the spot price. [1
Mark]
(a) increases
(b) does not change
(c) decreases
(d) increases or decreases
Q.45 Any person or persons acting in concert who together own ______% or more of
the open interest in index derivatives are required to disclose the same to the clearing
corporation. [1 Mark]
(a) 35
(b) 15
(c) 5
(d) 1
Q.46 NSE trades Nifty, CNX IT, BANK Nifty, Nifty Midcap 50 and Mini Nifty
futures contracts having all the expiry cycles, except. [1 Mark]
(a) Two-month expiry cycles
(b) Four month expiry cycles
(c) Three-month expiry cycles
(d) One-month expiry cycles
Q.47 An investor owns one thousand shares of Reliance. Around budget time, he gets
uncomfortable with the price movements. One contract on Reliance is equivalent to
100 shares. Which of the following will give him the hedge he desires? [1 Mark]
(a) Buy 5 Reliance futures contracts
(b) Sell 10 Reliance futures contracts
(c) Sell 5 Reliance futures contracts
(d) Buy 10 Reliance futures contracts
Q.48 Spot Price = Rs. 100. Call Option Strike Price = Rs. 98. Premium = Rs. 4. An
investor buys the Option contract. On Expiry of the Option the Spot price is Rs. 108.
Net profit for the Buyer of the Option is ___. [1 Mark]
(a) Rs. 6
(b) Rs. 5
(c) Rs. 2
(d) Rs. 4
Q.49 In the NEAT F&O system, the hierarchy amongst users comprises of _______.
[1 Mark]
(a) branch manager, dealer, corporate manager
(b) corporate manager, branch manager, dealer
(c) dealer, corporate manager, branch manager
(d) corporate manager, dealer, branch manager
Q.50 The open position for the proprietary trades will be on a _______ [1 Mark]
(a) net basis
(b) gross basis
Q.51 The minimum networth for clearing members of the derivatives clearing
corporation/ house shall be __________ [1 Mark]
(a) Rs.300 Lakh
(b) Rs.250 Lakh
(c) Rs.500 Lakh
Q.52 The Black-Scholes option pricing model was developed in _____. [1 Mark]
(a) 1923
(b) 1973
(c) 1887
(d) 1987
Q.53 In the case of index futures contracts, the daily settlement price is the ______. [1
Mark]
(a) closing price of futures contract
(b) opening price of futures contract
(c) closing spot index value
(d) opening spot index value
Q.54 Premium Margin is levied at ________ level. [1 Mark]
(a) client
(b) clearing member
(c) broker
(d) trading member
Q.55 In the Black-Scholes Option Pricing Model, as S becomes very large, both N(d1)
and N(d2) are both close to 1.0. [1 Mark]
(a) FALSE
(b) TRUE
Q.56 To operate in the derivative segment of NSE, the dealer/broker and sales persons
are required to pass _________ examination. [1 Mark]
(a) Certified Financial Analyst
(b) MBA (Finance)
(c) NCFM
(d) Chartered Accountancy
Q.57 The NEAT F&O trading system ____________. [1 Mark]

(a) allows one to enter spread trades
(b) does not allow spread trades
(c) allows only a single order placement at a time
Q.58 Margins levied on a member in respect of options contracts are Initial Margin,
Premium Margin and Assignment Margin [1 Mark]
(a) TRUE
(b) FALSE
Q.59 American option are frequently deduced from those of its European counterpart
[1 Mark]
(a) FALSE
(b) TRUE
Q.60 Which of the following is closest to the forward price of a share price if Cash
Price = Rs.750, Futures Contract Maturity = 1 year from date, Market Interest rate =
12% and dividend expected is 6%? [1 Mark]
(a) Rs. 795
(b) Rs. 705
(c) Rs. 845
(d) None of these

Q61. You are a speculator. You predict the market will go up in the near future and
want to take advantage of it. You would. [1 Mark]
a) Buy Nifty futures
b) Sell securities in the cash market.
c) Sell Nifty futures
d) None of the above.
Q62. A bull spread is created by [1 Mark]
a) Buying a call and a put
b) Buying two calls
c) Buying a call and selling a call
d) Selling two calls
Q63. Which of the below listed factors does not affect the price of an option on a
stock? [1 Mark]
a) Stock price
b) Volatility
c) Dividend
d) Liquidity of stock in the underlying cash market

Q64. Trading member Shantilal took proprietary purchase in a March 2000 contract.
He bought 1500 units @Rs.1200 and sold 1400 @ Rs. 1220. The end of day
Settlement price was Rs. 1221. What is the outstanding position on which initial
margin will be calculated? [1 Mark]
a) 300 units
b) 200 units
c) 100 units
d) 500 units
Q65. Initial margin is collected to_______ [1 Mark]
a) make good losses on the outstanding position
b) make good daily losses
c) safeguard against potential losses on out standing positions
d) none of the above
Q66. The Neat F & O trading system ________ [1 Mark]
a) Allows one to enter combination trades
b) does not allow combination trades
c) allows only a single order placement at a time

Q67. Daily Mark to Market settlement of futures takes place on _____ basis. [1
Mark]
a) T+0
b) T+3
c) T+5
d) T+1
Q68. Immediate or cancel is an order which will automatically ____ in F & O

segment of
NSEIL. [1 Mark]
a) Be matched because it being a preferential order
b) be cancelled if it is not matched
c) Get stored in the system for matching, immediately and in its entirely. If not
executed immediately
d) cancel the unmatched portion of the Order quantity.
Q69. Futures on individual stocks are allowed [1 Mark]
a) On all stocks listed on the stock exchange
b) On few selected stocks only
c) On all stocks listed on all stock exchanges in India.
d) On all stocks where price is more than Rs. 100 per share.
Q70. If someone is ‘bearish’ in the market ? [1
Mark]
a) He expects the market to rise.
b) He expects the market to fall.
c) He expects the market to move sideways.
d) He expects the market to close.
Q71. The value of derivative instrument [1

Mark]
a) Is fixed
b) Is reset at fixed internals
c) Depends on the value of an underlying asset.
Q72. Futures contracts can be reversed with any member of the derivatives segment
of the exchange. [1 Mark]
a) True
b) Cannot be reversed
c) Cannot be reversed for the next one month.

d) False
Q73. A call option at a strike of Rs. 176 is selling at a premium of Rs.18,. At what
price will it break even for the buyer of the option?. [1 Mark]
a) 196
b) 187
c) 204
d) 194
Q74. At the point of entering into the future contract [1 Mark]
a) Both the buyer and the seller pay initial margin to the exchange
b) The buyer alone pays initial margin to the exchange.
c) The seller alone pays initial margin to the exchange.
d) No margin is playable to the exchange by the buyer of the seller.
Q75. If you have bought a futures contract and the price drops, you will be making a
profit. [1 Mark]
a) True
b) False
Q76. If the price of the underlying asset rises sharply after the initiation of a futures
contract [1 Mark]
a) The long position becomes profitable
b) The long position becomes unprofitable
c) The short position becomes profitable
Q77. You can buy stock futures in India regardless of whether you own the shares or
not. [1 Mark]
a) True
b) False
Q78. A fund manager is bullish on the market. What should be his course of action?
[1 Mark]
a) Buy the index future
b) Sell the index future
c) Sell his entire portfolio
Q79. In case of futures, the initial margin is paid only by the seller and not the buyer.
[1 Mark]
a) True
b) False
c) True only in Mumbai
d) True only in Delhi.
Q80. A derivative exchange faces [1 Mark]
a) Legal risk
b) Operational risk
c) Liquidity risk.
d) All of the above.
Q81. The securities which are not delivered in the clearing house during pay-in, are
purchased by the clearing house from the market. The process is known
as [1 Mark]
a) Close-out
b) Penalty
c) Auction
d) Upla badla
Q82. If the annual risk-free rate is 10% then the ‘r’ used in the Black-Scholes formula
should be [1 Mark]
a) 0. 095
b) 0.12
c) 12
d) none of the above
Q83. A stock option is an example of a [1

Mark]
a) Commodity
b) Derivative Instrument
c) Money market instrument
d) Foreign Exchange contract
Q84. Intrinsic value of an option cannot be negative. [1 Mark]
a) True
b) False
c) True only in Mumbai
d) True only in Delhi

Q85. Market makers add [1
Mark]
a) Speculation to the market.
b) Liquidity to the market.
c) Fluctuation to the market.
d) Nothing to the market.
Q86. With decrease in strike price, the premium on Call decreases. [1 Mark]
a) True
b) False
c) True only in USA
d) True only
Q87. Time value and intrinsic value together comprise option premium. [1
Mark]
a) True
b) False
Q88. The buyer of an option can lose not more than the option premium paid [1
Mark]
a) True
b) False
c) True only in USA
d) True only in Japan
Q89. The bid is the price at which market maker is prepared. [1

Mark]
a) To buy.
b) To sell
c) To remain idle
Q90. A stock broker means a member of ____________ [1

Mark]
a) SEBI
b) Any exchange
c) Any stock exchange
d) A recognized stock exchange

Q91. An investor is bearish about ABC Ltd. and sells ten one-month ABC Ltd.
Futures contracts at Rs.5,00,000. On the last Thursday of the month, ABC Ltd. closes
at Rs.510. He makes a _________. (assume one lot = 100) [1 Mark]
a) Profit of Rs. 10,000
b) loss of Rs. 10,000
c) loss of Rs. 5,100
d) profit of Rs. 5,100
Q92. Mark-to-market margins will be collected on a : [1

Mark]
a) Weekly basis
b) Every 2 days
c) Every 3 days
d) Daily basis
Q93. Who will be eligible for clearing trades in stock futures? [1

Mark]
a) All Indian citizens
b) All members of the BSE

c) Only members who are registered with the derivatives segments as Clearing
Members
d) all of the above.
Q94. The daily settlement price for Index futures shall be decided by [1
Mark]
a) SEBI
b) the Reserve Bank of India.
c) The clearing corporation / house
d) none of the above.
Q95. Initial margin of the previous day must be paid [1

Mark]
a) By the end of the day.
b) Before beginning of the next trading day.
c) During banking hours next day.
Q96. Initial margin is set up taking into account the volatility of the underlying
market. Generally higher the volatility, higher is the initial
margin. [1 Mark]
a) True
b) False
Q97. Value-at-risk is calculated on the basis of [1

Mark]
a) Historical Volatility
b) Perfect market prices.
c) Equilibrium market prices.
Q98. The value of an option ______ with increase in volatility [1

Mark]
a) decreases
b) increases
c) does not change
d) increases or decreases
Q99. The beta of A.S.STEELS is 1.3. A person has a long A.S.STEELS position of
Rs. 200,000 coupled with a short Nifty position of Rs.100,000. Which of the
following is TRUE? [1 Mark]
(a) He is bullish on Nifty and bearish on A.S.STEELS

(b)He has a partial hedge against fluctuations of Nifty
(c) He is bearish on Nifty as well as on A.S.STEELS
(d) He has a complete hedge against fluctuations of Nifty
Q100. Who are the participants in the derivatives market? [1

Mark]
a) Hedgers
b) Speculators
c) Arbitrageurs
d) All of the above
1. All Stock Options are American in nature.
a. FALSE
b. TRUE
c. I am not attempting this question
d.
e.
ANSWER :a
2. An European Option
a. can be exercised anytime during the life of the Option
b. can be exercised only at maturity
c. is traded only on the European Exchange
d. is a floating rate option
e. I am not attempting this question
ANSWER :b
3. An investor bought a put option on a stock with a strike price Rs. 2000 for Rs. 200.
The option will
be in the money when _______.
a. The stock price is greater than Rs. 2200
b. The stock price is less than Rs. 2000
c. The stock price is less than Rs. 1800
d. The stock price is greater than Rs. 2000
ANSWER :b
4. An investor buys 2 contracts of TCS futures for Rs. 570 each. He sells of one
contract at Rs. 585. TCS
futures closes the day at Rs. 550. What is the net payment the investor has to pay/
receive from his
broker?
1 TCS contract = 1000 shares
a. Receive Rs. 15000 from the broker
b. Pay Rs. 5000 to the broker
c. Receive Rs. 5000 from the broker
d. Pay Rs. 20000 to the broker
ANSWER :d
6. An investor buys a 1 lot of Nifty futures at Rs. 4927 and sells it at Rs. 4567 If one
contract is 50
shares what is the Profit/ Loss in the transaction?
a. Profit Rs. 22000
b. Loss Rs. 22000
c. Loss Rs. 18000
d. Profit Rs. 18000
ANSWER :d
7. As more and more ____ trades take place, the difference between spot and futures
prices would narrow.
a. arbitrage
b. delta
c. speculative
d. hedge
ANSWER :a
8. At any time , the F&O segment of nse provides trading facilities for..... NIFTY
futures contracts.
a. two
b. three
c. nine
d. none of the above
ANSWER :b
9. At the end of each trading day, the Clearing House process of settling your account
on a cash basis(funds added to your balance if your position has made a profit,
deducted if you sustained a loss)
is called:
a. Initial performance bond call.
b. Performance bond call.
c. Maintenance performance bond call.
d. Marking to the market.

ANSWER :d
10. Computational methodology followed for construction of stock market indices are
a. Free Float Market Capitalization weighted Index
b. Market Capitalization weighted index
c. Price Weighted Index.
d. True all of them
ANSWER :d
Quiz Title: NISM Series VIII: Equity Derivatives Certification Examination Mock
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1.[0/1] 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 ________
A. The Stock Broker fails to pay fees
B. The Stock Broker is suspended by the Stock Broker
C. The stock broker violates the conditions of registration
D. In any of the above situations
Answer: D
2.[0/1] Index options on the S&P CNX Nifty can be exercised ___________.
A. upon maturity
B. any time on or before maturity
C. any time upto maturity
D. on a date pre-specified by the trading member
Answer: B
3.[0/1] The futures price is ________.
A. price at which a futures contract trades in the market
B. the price set by the exchange
C. spot price plus cost of carry

D. the price of a contract in the future
Answer: C
4.[0/1] The initial margin amount is large enough to cover a one-day loss that can be
encountered on ______%
of the days.
A. 95
B. 99
C. 90
D. 50
Answer: A
5.[1/1] In Indian context, derivative includes: A) A security derived from a debt

instrument, share, loan whether
secured or unsecured, risk instrument or contract for differences or any other form of
security; B) A contract which
derives its value from the prices, or index of prices, of underlying securities;
A. A
B. B
C. Both of the above
D. None of the above
Answer: C
6.[1/1] The NEAT F&O trading system _____________.
A. does not allow combination trades
B. allows only a single order placement at a time
C. allows one to enter combination trades
1 / 15
http://www.prepcafe.in . Date 10 April, 2014, 00:05
D. none of the above
Answer: C
7.[0/1] Initial margin in a futures contract is kept low
A. TRUE
B. FALSE
Answer: B
8.[1/1] On expiry, the settlement price of an index futures contract is
A. opening price of futures contract
B. closing index value
C. closing price of futures contract
D. opening index value
Answer: B
9.[1/1] Which of the following is not the duty of the trading member
A. Filling of 'Know Your Client' form
B. Execution of Client Broker Agreement
C. Bringing risk factors to the knowledge of client
D. Assisting the client to arrange for margins
Answer: D
10.[1/1] June futures contract on WIPRO closed at Rs. 1153 on May 20 and at Rs.
1150 on May 21, 2002. Raju
has a short position of 4000 in the June futures contract. On May 21, 2002, he sells
3000 units of 10-June-2002
expiring Put Options on WIPRO at strike price of Rs.1145 for a premium of Rs.28 per
unit. What is his net
obligation to / from the Clearing Corporation for May 21, 2002?
A. Pay-in of Rs.32,000
B. Pay-in of Rs.72,000
C. Pay-out of Rs.96,000
D. Pay-out of Rs.32,000
Answer: B
11.[0/1] Cyrus is short 600 WIPRO July Puts at strike Rs. 1520 for a premium of Rs.
33 each on July 22, 2002.
On July 25, 2002 (the expiration day of the contract), the spot price of WIPRO closes
at Rs.1553, while the July
futures on WIPRO close at 1555. Does Cyrus have an obligation to the Clearing
Corporation on his positions, and
how much, if any?
A. Yes. Rs.18,900 pay-out
B. Yes. Rs.19,800 pay-out
C. Yes. Rs.18,900 pay-in
D. No pay in or pay-out on expiration of contract
Answer: D
12.[1/1] The spot price of TISCO is Rs. 2050 and the cost of financing is 10%. What
is the fair price of a one
month futures contract on TISCO?
A. 2,085.15
B. 2,099.40
C. 2,082.80
D. 2,066.30
Answer: D
13.[0/1] You have bought a portfolio of securities on the exchange. To eliminate the
risk arising out of market,
you should _____.
A. buy index futures

2 / 15
B. buy stock futures
C. sell index futures
D. sell stock futures
Answer: D
14.[0/1] Futures differs from forwards in the sense that
A. settlement of contract takes place in the future
B. both parties are bound to give/take delivery
C. positions are marked-to-market everyday
D. contracts are custom designed
Answer: B
15.[1/1] Which of the following is the duty of the trading member?
A. Sending the periodical statement of accounts to clients
B. Maintaining unique client codes
C. Ensuring timely pay-in and pay-out of funds
D. All of the above
Answer: D
16.[1/1] VaR methodology seeks to measure the amount of value that a portfolio may
stand to lose within a
certain horizon time period due to potential changes in ______________.
A. underlying exposures
B. underlying stock volatility
C. underlying asset spot price
D. underlying index volatility
Answer: A
17.[0/1] Ms. Shetty has sold 300 calls on WIPRO at a strike price of Rs.1503 for a
premium of Rs.28 per call on
April 1, 2002. The closing price of equity shares of WIPRO is Rs. 1553 on that day. If
the call option is assigned
against her on that day, what is her net obligation on April 01, 2002?
A. Pay-out of Rs.13,400
B. Pay-out of Rs. 21,600
C. Pay-in of Rs.15,000
D. Pay-in of Rs.6,600
Answer: D
18.[1/1] Initial margin is collected to __________.
A. provide for losses that have already occurred

B. make good daily losses
C. safeguard against potential losses on outstanding positions
D. square-off a position on the expiry of the contract
Answer: C
19.[1/1] Which of the following are derivatives?
A. Futures
B. Options
C. Forwards
D. All of the above
Answer: D
20.[1/1] A market index is very important for its use ___________.
A. in portfolio management
B. as a benchmark of portfolio performance
3 / 15
C. as a barometer for market behavior
D. All of the above
Answer: D
21.[1/1] Immediate or cancel is an order which will automatically __________ in
F&O segment of NSEIL
A. get stored in the system for matching, if not executed immediately
B. be matched because it being a preferential order
C. cancel the unmatched portion of the order quantity
D. be cancelled if it is not matched immediately and in its entirety
Answer: D
22.[1/1] Which of the following statements is true?
A. F&O Segment has a Basket trading facility.
B. Basket trading has been discontinued in the F&O Segment.
C. NSE does not allow basket trading in it's F&O Segment.
D. Basket trading is illegal in India.
Answer: A
23.[0/1] _______ order allows the user to execute a contract as soon as it is entered
into the system, failing which the order is immediately cancelled from the system.
A. GTD
B. GTC
C. IOC
D. Limit
Answer: D
24.[1/1] Each user of the trading member in F&O segment of NSEIL is assigned a
unique _________ ID
A. trading member
B. user
C. branch
D. exchange
Answer: A
25.[0/1] What is displayed in the NEAT Trading System Ticker Screen
A. The electronic display that continuously shows only the stock symbol, volume and
price at which each
successive trade occurs.
B. The electronic display that continuously shows only the price at which each
successive trade occurs.
C. The electronic display that continuously shows only the stock symbol and volume
at each successive trade
occurs
Answer: B
26.[1/1] Daily Mark to Market settlement of futures takes place on ________ basis .
A. T+0
B. T+5
C. T+3
D. T+1
Answer: D
27.[1/1] An investor owns one thousand shares of Reliance. Around budget time, he
gets uncomfortable with the price movements. One contract on Reliance is equivalent
to 100 shares. Which of the following will give him the hedge he desires?
A. Buy 5 Reliance futures contracts
4 / 15
B. Sell 10 Reliance futures contracts
C. Sell 5 Reliance futures contracts
D. Buy 10 Reliance futures contracts
Answer: B
28.[0/1] An investor is bearish about Tata Motors and sells ten one-month ABC Ltd.
futures contracts at Rs.6,06,000. On the last Thursday of the month, Tata Motors
closes at Rs.600. He makes a ________ . (assume one lot = 100)
A. Profit of Rs. 6,000
B. Loss of Rs. 6,000
C. Profit of Rs. 8,000
D. Loss of Rs. 8,000
Answer: B
29.[0/1] In case a Future Contract is not traded in a day, which of the following prices
is reckoned for daily mark
to market settlement?
A. Theoretical price
B. Closing price of the last traded day
C. Closing price of the futures contract
D. Closing price of the underlying
Answer: D
30.[0/1] To be eligible for options trading, the market wide position limit in the stock
should not be less than Rs.
___________
A. 100 crore
B. 300 crore
C. 500 crore
D. 250 crore
Answer: C
31.[1/1] A stock is currently selling at Rs. 70. The put option to sell the stock at Rs. 75
costs Rs. 12. What is the
time value of the option?
A. Rs. 5
B. Rs. 2
C. Rs. 4
D. Rs. 7
Answer: D
32.[1/1] Weekly options trading commenced on NSE in _______
A. 2-Jun-05
B. NSE does not trade in Weekly options
C. 4-Jul-05
D. 4-Jun-05
Answer: B
33.[0/1] Value-at-risk measures ___________.
A. Credit rating of an investor
B. Value of proprietary portfolio
C. Risk level of a financial portfolio
D. Networth of an investor
Answer: B
34.[1/1] Mark-to-market margins are collected ___________.
5 / 15

A. On a weekly basis
B. Every 2 days
C. Every 3 days
D. On a daily basis
Answer: D
35.[0/1] Clients' positions cannot be netted off against each other while calculating
initial margin on the
derivatives segment.
A. FALSE
B. TRUE
Answer: A
36.[1/1] A defaulting member's clients positions could be transferred to

____________ by the Clearing
Corporation.
A. Another solvent member
B. The Exchange
C. A suspense account
D. Error account
Answer: B
37.[1/1] 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?
A. 800
B. 1700
C. 900
D. 100
Answer: B
38.[0/1] Is it possible to place a limit buy order for 100 contracts of XYZ at Rs.770
per contract
A. Yes
B. No
Answer: B
39.[0/1] A trader has bought 100 shares of XYZ at Rs.780 per share. He expects the
price to go up up but wants
to protect himself if the price falls. He does not want to lose more than Rs.1000 on
this long position in XYZ. What
should the trader do?
A. Place a limit sell order for 100 shares of XYZ at Rs.770 per share
B. Place a stop loss sell order for 100 shares of XYZ at Rs.770 per share
C. Place a limit buy order for 100 shares of XYZ at Rs.790 per share
D. Place a limit buy order for 100 shares of XYZ at Rs.770 per share
Answer: D
40.[1/1] On the derivative exchanges, all the orders entered on the Trading System are
at prices exclusive of
brokerage.
A. FALSE
B. TRUE
Answer: B
41.[0/1] 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 ___________.
A. Bearish spread
B. Bullish spread
6 / 15
C. Butterfly spread
D. Calendar spread
Answer: C
42.[1/1] 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?
A. 140
B. 40
C. 80
Answer: B
43.[1/1] Which is the ratio of change in option premium for the unit change in interest
rates?
A. Vega
B. Rho
C. Theta
D. Gamma
Answer: B
44.[1/1] Three Call series of XYZ stock - January, February and March are quoted.
Which will have the lowest
Option Premium (same strikes)?
A. March
B. February
C. January
D. All will be equal
Answer: C
45.[1/1] Mr. X purchases 100 put option on stock S at Rs. 30 per call with strike price
of Rs. 280. If on exercise
date, stock price is Rs. 350, ignoring transaction cost, Mr. X will choose
_____________.
A. To exercise the option
B. May or may not exercise the option depending on whether he is in his hometown or
not at that time
C. May or may not exercise the option depending on whether he like the company S
or not
D. Not to exercise the option
Answer: D
46.[0/1] 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?
A. Out-of the money option
B. In-the -money option
C. At-the-money option
D. Higher-the-money option
Answer: C
47.[1/1] Higher the price volatility of the underlying stock of the put option,
______________.
A. Lower would be the premium
B. Higher would be the premium
C. Nil (zero) would be the premium
D. Volatility does not effect put value
Answer: B
48.[0/1] Exchange traded options are _______________.
A. Always in-the-money options
B. Standardised options
C. Customised options
7 / 15
D. Always out-of-the money options
Answer: C
49.[1/1] An in-the-money option is _____________.
A. An option with a negative intrinsic value
B. An option which cannot be profitably exercised by the holder immediately

C. An option with a positive intrinsic value
D. An option with zero time value
Answer: C
50.[1/1] A put option gives the buyer a right to sell how much of the underlying to the
writer of the option?
A. Any quantity
B. The specified quantity or less than the specified quantity
C. Only the specified quantity (lot size of the option contract)
D. The specified quantity or more than the specified quantity
Answer: C
51.[0/1] 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.
A. FALSE
B. TRUE
Answer: B
52.[1/1] Current Price of XYZ Stock is Rs. 286. Rs. 260 strike call is quoted at Rs. 45.
What is the Intrinsic
Value?
A. 25
B. 19
C. 26
D. 24
Answer: B
53.[1/1] You sold a Put option on a share. The strike price of the put was Rs.245 and
you received a premium of
Rs.49 from the option buyer. Theoretically, what can be the maximum loss on this
position?
A. 206
B. 196
C. 49
Answer: B
54.[1/1] What role do speculators play in the futures market?
A. They produce the commodities traded at futures exchanges
B. They take delivery of the commodities at expiration
C. They add to the liquidity in the futures markets
D. They transfer their risk to the hedgers
Answer: C
55.[1/1] Cost of carry model states that ______________.
A. Price of Futures = Spot + Cost of Carry

B. Price of Futures = Spot - Cost of Carry
C. Price of Futures = Spot Price
D. Price of Futures = Cost of Carry
Answer: A
56.[0/1] The buyer of an option cannot lose more than the option premium paid.
8 / 15
A. True only for European options
B. True only for American options
C. True for all options
D. False for all options
Answer: A
57.[1/1] Selling short a stock means ___________.
A. Seller has to deliver the stock within a short time
B. Seller does not own the stock he is supposed to deliver
C. Seller owns the stock he is supposed to deliver
D. Seller has more than a year's time to deliver the stock which he sold
Answer: B
58.[1/1] When the near leg of the calendar spread transaction on index futures expires,
the farther leg becomes a
regular open position.
A. FALSE
B. TRUE
Answer: B
59.[1/1] Margins in 'Futures' trading are to be paid by _______.
A. Only the buyer
B. Only the seller
C. Both the buyer and the seller
D. The clearing corporation
Answer: C
60.[0/1] In an equity scheme, fund can hedge its equity exposure by selling stock
index futures.
A. FALSE
B. TRUE
Answer: A
61.[1/1] 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?
A. 11
B. 3
C. 5
D. 15
Answer: B
62.[1/1] A calendar spread contract in index futures attracts ___________.
A. Same margin as sum of two independent legs of futures contract
B. Lower margin than sum of two independent legs of futures contract
C. Higher margin than sum of two independent legs of futures contract
D. No margin need to be paid for calendar spread positions
Answer: B
63.[1/1] If you have sold a XYZ futures contract (contract multiplier 50) at 3100 and
bought it back at 3300, what
is your gain/loss?
A. A gain of Rs. 10,000
B. A loss of Rs. 5,000
C. A loss of Rs. 10,000
D. A gain of Rs. 5,000
Answer: C
9 / 15
64.[1/1] 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%?
A. 772.5
B. 795
C. 840
D. 940.8
Answer: B
65.[1/1] 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.)
A. Selling 1 June XYZ futures contract at 3200
B. Buying 1 June XYZ futures contract at 3600
C. Buying 1 June XYZ futures contract at 3200
D. Selling 1 June XYZ futures contract at 3600

Answer: C
66.[1/1] 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?
A. 16,600
B. -15,600
C. -16,600
D. 15,600
Answer: D
67.[0/1] Impact cost is low when the liquidity in the system is poor.
A. TRUE
B. FALSE
Answer: A
68.[0/1] Operational risks include losses due to ____________.
A. Too much of management control
B. Income tax regulations
C. Government policies
D. Inadequate disaster planning
Answer: A
69.[0/1] Financial derivatives provide the facility for __________.
A. Speculation
B. Hedging
C. Arbitraging
D. All of the above
Answer: C
70.[1/1] The purchase of a share in one market and the simultaneous sale in a different
market to benefit from
price differentials is known as ____________.
A. Mortgage
B. Hedging
C. Arbitrage
D. Speculation
Answer: C
10 / 15
71.[1/1] An index option is a __________________.
A. Debt instrument
B. Derivative product
C. Cash market product
D. Money market instrument
Answer: B
72.[0/1] A trading member allowed to clear his own trades only is known as
_________.
A. Trading member - clearing member
B. Trading members are not allowed to clear their own trades
C. Professional clearing member
D. Self clearing member
Answer: A
73.[1/1] NISM stands for ___________.
A. National Institute of Stock Markets
B. National Integrated Stock Market
C. National Institute of Securities Markets
D. National Institution of Security Market
Answer: C
74.[1/1] A stock broker applies for registration to SEBI _________.
A. directly
B. through association of members

C. through Ministry of Finance
D. through stock exchange(s) of which he or she is admitted as a member
Answer: D
75.[1/1] Santosh is bearish about ABC Ltd.and sells ten one-month ABC Ltd.futures
contracts at Rs.2,96,000. On
the last Thursday of the month, ABC Ltd.closes at Rs.310. He makes a _________.
(assume one lot = 100)
A. profit of Rs. 7,000
B. loss of Rs. 7,000
C. profit of Rs. 14,000
D. loss of Rs. 14,000
Answer: D
76.[1/1] Hedging with index futures means ___________.
A. long security, short security
B. long security, short index futures
C. long security, long index futures
D. long index futures, short index futures
Answer: B
77.[1/1] At the balance sheet date, the balance in the `initial margin equity index
futures account' should be
shown separately under the head
A. outstanding balance
B. current assets
C. prepaid expenses
D. current liabilities
Answer: B
78.[0/1] If the annual risk free rate is 10%, then the `r' used in the Black Scholes
formula should be ______.
A. 0.1398
11 / 15
B. 1.1
C. 0.095
Answer: A
79.[1/1] Swaptions are:
A. Options to roll over a swap
B. Options on futures
C. Options to buy or sell a swap

Answer: C
80.[0/1] Around 60% of the trading volume on the American Stock Exchange is from
A. Index Funds
B. Index Futures
C. Index Options
D. ETFs
Answer: B
81.[0/1] A writer of a call option is a person who _____________.
A. Has the right to buy the underlying asset
B. Has the obligation to sell the underlying asset
C. Has the right to sell the underlying asset
D. Has the obligation to buy the underlying asset
Answer: A
82.[0/1] Which of the following is required for personnel working in the industry in
order to dispense quality
intermediation?
A. To possess requisite skills and knowledge.
B. To have a proper understanding of the business and skills to help it remain

competitive.
C. To follow certain code of conduct.
D. All of the above
Answer: C
83.[1/1] The clearing member/trading member is required to disclose to the clearing

corporation details of any
person(s) acting in concert who together own _____% or more of the open interest of
all futures and options
contracts on a particular underlying index on the stock exchange.
A. 12
B. 20
C. 15
D. 25
Answer: C
84.[0/1] Which of the following should be disclosed separately for long and short
positions, in respect of each
series of equity index futures as of the balance sheet date?
A. The daily settlement price
B. Number of equity index futures contracts having open position
C. Number of units of equity index futures pertaining to the contracts
D. All of the above

Answer: B
85.[1/1] A dealer sold one January Nifty futures contract for Rs.250,000 on 15th
January. Each Nifty futures
contract is for delivery of 50 Nifties. On 25th January, the index closed at 5100. How
much profit/loss did he
12 / 15
make?
A. Profit of Rs. 9000
B. Loss of Rs. 8000
C. Loss of Rs. 9500
D. Loss of Rs. 5000
Answer: D
86.[1/1] Spot Price = Rs. 100. Call Option Strike Price = Rs. 98. Premium = Rs. 4. An
investor buys the Option
contract. On Expiry of the Option the Spot price is Rs. 108. Net profit for the Buyer of
the Option is ___.
A. Rs. 6
B. Rs. 5
C. Rs. 2
D. Rs. 4
Answer: A
87.[1/1] ETFs can be ________.
A. bought on an exchange but sold only directly to the mutual fund
B. bought and sold only directly with a mutual fund
C. bought and sold on an exchange like shares
Answer: C
88.[0/1] The Black-Scholes option pricing model was developed in ____ .
A. 1923
B. 1973
C. 1887
D. 1987
Answer: C
89.[1/1] A stock broker is allowed to buy, sell or deal in securities __________.
A. only on being admitted as a member of a stock exchange
B. on submission of document with stock exchange for admission
C. only on having a certificate of registration granted by SEBI
D. on submission of document with SEBI for registration
Answer: C
90.[1/1] The beta of Nifty is _______.
A. 1.7
B. 1
C. -1
Answer: B
91.[1/1] The intrinsic value of a call option is the amount the option is
A. at-the-money
B. above-the-money
C. in-the-money
D. out-of-the-money
Answer: C
92.[0/1] Transaction tax is payable by the __________ of the derivative instrument.
A. designer
B. buyer
C. originator
13 / 15
D. seller
Answer: B
93.[0/1] NSCCL's on-line position monitoring system monitors open position of
_____________on a real time
basis.
A. dealer only
B. trading member only
C. clearing member only
D. clearing member and trading member
Answer: D
94.[0/1] An 'authorised person' in the Futures & Options segment is ___________.
A. any person who is acting in any capacity on behalf of the trading member or a
participant for any activity
relating to the trades done and executed
B. a person authorised by the exchange as an approved user of a trading member
C. an approved user of a participant
D. All of the above
Answer: C
95.[1/1] Futures trading first emerged in the exchanges located in ________.
A. London
B. Chicago
C. Singapore
D. Frankfurt
Answer: B
96.[1/1] The maximum brokerage chargeable by a trading member in relation to

trades effected in the contracts
admitted to dealing on the F&O segment of NSEIL is fixed at ______ of the contract
value, exclusive of statutory
levies.
A. 1.50%
B. 2.50%
C. 0.75%
D. 3%
Answer: B
97.[0/1] Derivatives can be used for which of the following?
A. Hedging
B. Arbitrage
C. Speculating
D. All of the above
Answer: B
98.[0/1] An option to buy or sell a swap, that becomes operative at the expiry of the
option, is called a ______
A. swaption
B. futures
C. basket option
D. Warrants
Answer: C
99.[0/1] ______ is a form of basket options.
A. Equity index futures
B. Equity index options
C. Swaptions
14 / 15
D. Warrants
Answer: C
100.[1/1] Seller of a put option expects ___________.
A. Decrease in the price of underlying asset
B. Increase in the price of underlying asset
C. No change in the price of underlying asset
D. Both (2) and (3)
Answer: B
Question No. Answers
1 A 21 A 41 C 61 A 81 FormattedCTable
2 A 22 A 42 A 62 C 82 A
3 B 23 A 43 A 63 D 83 B
4 A 24 C 44 C 64 C 84 A
5 B 25 D 45 B 65 C 85 B
6 D 26 B 46 B 66 A 86 B
7 A 27 A 47 B 67 D 87 A
8 C 28 B 48 A 68 D 88 A
9 A 29 D 49 B 69 B 89 A
10 D 30 D 50 A 70 B 90 D
11 B 31 C 51 A 71 C 91 B
12 A 32 A 52 B 72 A 92 D
13 A 33 B 53 A 73 D 93 C
14 A 34 C 54 A 74 A 94 C
15 B 35 A 55 B 75 B 95 B
16 B 36 A 56 C 76 A 96 A
17 B 37 D 57 A 77 A 97 A
18 A 38 C 58 A 78 A 98 B
19 A 39 C 59 B 79 B 99 B
20 C 40 B 60 A 80 D 100 D

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Investor A wants to sell 20 contracts of August series at Rs.

502050 Formatted: Highlight

On the Clearing Council of the Clearing

FALSE Formatted: Highlight

Seller does not own the

Seller does not own the

The clearing corporation

They add to the liquidity Formatted: Highlight

May or may not exercise

The specified quantity or

Income tax regulations

Exchange traded options are _______________.

Who is eligible for clearing trades in index

All members of the stock

An option with a delta of 0.5 will increase in value

There would be no chang

The stock broker is

Clients' positions can not be netted off against

Selling 1 June XYZ

Value-at-risk provides the ______________.

You sold one XYZ Stock Futures contract at Rs.

Cost of carry model states that ______________.

Price of Futures = Spot -

In the money option Formatted: Highlight

Higher the money option

Place a limit buy order for

An index option is a __________________.

Money market instrument

Which of the following is closest to the forward

Clearing corporation on a derivatives exchange

Higher the price volatility of the underlying stock

Volatility does not effect

On the derivative exchanges, all the orders entered

TRUE Formatted: Highlight

TRUE Formatted: Highlight

Mr B can enjoy higher

Which is the ratio of change in option premium for

All will be equa

An in-the-money option is __________________.

An option with a negative

True only for American

True only for European

A loss of Rs. 5000

A Series of Forward contract can be also broadly classified as

How the future value calculated

Future price multiplied with lot size

Q.1 Theta is also referred to as the _________ of the portfolio [1 Mark]

(a) time decay

(b) risk delay

(c) risk decay

(d) time delay

(a) they are regulated by RBI

(b) they require payment of a performance bond

(c) they are a legally enforceable promise

(d) they are market to market

(a) mark-to-market settlement price

(b) net settlement price

(c) opening price

(d) closing price