NISM SERIES VIII EQUITY
DERIVATIVES MOCK TEST DEMO
Explanation: The criteria for retention of stock in equity derivatives segment are : a) The stock’s median quarter-sigma order size over last six months shall not be less than Rs. 5 lakhs (Rupees Five Lakhs). b) MWPL of the stock shall not be less than Rs. 200 crores (Rupees Two Hundred crores). c) The stock’s average monthly turnover in derivatives segment over last three months shall not be less than Rs. 100 crores If a stock fails to meet these retention criteria for three months consecutively, then no fresh month contract shall be issued on that stock. However, the existing unexpired contracts may be permitted to trade till expiry and new strikes may also be introduced in the existing contract months. Further, once the stock is excluded from the F&O list, it shall not be considered for re-inclusion for a period of one year.
Explanation: Penalty are levied as under : 1st instance - 0.07% per day 2nd to 5th instance of disablement - 0.07% per day + Rs.5,000/- per instance from 2nd to 5th instance 6th to 10th instance of disablement - 0.07% per day + Rs.20,000/- ( for 2nd to 5th instance) + Rs.10000/- per instance from 6th to 10th instance 11th instance onwards - 0.07% per day + Rs.70,000/- ( for 2nd to 10th instance) + Rs.10,000/- per instance from 11th instance onwards.
Explanation: When you sell a Put option you believe the share will go up. If the share goes down you will make a loss. Theoretically the share of 245 can fall to zero. So you can make a loss of 245. You have received a premium of 49. So the maximum loss can be 245 - 49 = 196
Explanation: A Put option is In the Money when the Spot price is below the Strike price. A Call option is In the Money when the Spot price is above the Strike price.
Explanation: SBI has a beta of 0.9 means that if Nifty falls by 100, the SBI will fall by 90 ie. 10% less. So wee need to hedge 10% less of NIfty, ie 10% of Rs 300000 = 30,000 So we need to sell 270000 of Nifty
Explanation: Buying a Put options will help him hedge against a downfall in share price by paying the premium.
Explanation: On the expiry day, if the client does not square up his position, then its automatically squared up by the exchange by the closing price of that underlying. The closing price is the last half hour weighted average price of the underlying on the expiry day.
Explanation: European Option is an an option that can only be exercised at the end of its life, at its maturity / expiry and not before that. An American option can be exercised any time. A buyer of an European option that does not want to wait for maturity to exercise it can sell the option to close the position.
Explanation: As per the rules in the Indian Stock markets, if the open position of a trader is not squared up till maturity ie. last Thrusday of the month, then the position is automatically squared up by the exchange by the closing price. For example - Mr A bought one Ambuja Cement contract of 1000 shares at Rs 180 on 8th January. He does not sell it even by the last day ie. last Thrusday of January. If the closing price of Ambuja Cement is Rs 184, his contract will be squared up at Rs 184 and Rs 4 x 1000 = Rs 4000 ( less brokerage etc. ) will be his profit. In case Ambuja Cement closes below Rs 180, then he will incur a loss.
Explanation: Intrinsic Value of an In the money call option is the Spot Price - Strike Price.
Explanation: In a futures market margins are payable by both the parties.
Explanation: Mr. Manoj bought a PUT option so he had a view that the stock will fall. On the exercise day the stock has risen and so Mr Manoj is in a loss. So he will not exercise the option.
Explanation: As per SEBI rules, the Clearing Corporation can transfer client positions from one broker member to another broker member in the event of a default by the first broker member.
Explanation: When the Strike Price is below the Spot Price, the Call Option is 'In the Money' ie. profitable. Intrinsic Value for a such a Call Option = Spot Price - Strike Price = 347 - 325 = 22
Explanation: Mr Deshmukh is short ie. he has sold Nifty futures. He will make a profit when Nifty falls. His profit is Rs 5000 and lot size is 50, so per share he has to get Rs 100 to make a profit of Rs 5000 ( 50 x 100) So when Nifty falls to 5500 and Mr Deshmukh buys it to square up his position, he will make a profit of Rs 5000.
Explanation: Modern traders and investors also use financial derivatives for Arbitrage and Speculation, apart from hedgeing.
Explanation: Calendar spread means an options or futures spread established by simultaneously entering a long and short position on the same underlying asset but with different delivery months. In the above question, lets assume a trader has gone long in index options in current month and short in index options in third month. Incase he does not close his position by the end of current month, his current month option will expire and the third month option contract will become an open position as there is no opposite option contract in his account.
Explanation: Various future contract position in the same underlying ( even at various expiry dates ) are netted off before arriving at open postion. Here in this case its 8 - 6 = 2. This is because a long and a short position in the same underlying will have no risk (if one will make profit, the other will be in a simillar loss) and only the open position will have the risks and margins will be collected from these open positions.
Explanation: Higher volatility means higher risk and higher risk means one has to pay a higher premium.
Explanation: In call options, when the Spot price is higher than Strike price - that call option is In the Money.
Explanation: Buyers of Options pay the premium and that is the maximum loss they can suffer - so they need not pay any margin. A seller of options receives the premium but he can suffer infinte losses - so margins are collected both from sellers of Call and Put options
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