Explanation:

One of the reasons the local currency depreciates is due to out flow of foreign capital.

So by increasing the limits of Foreign Portfolio Investor (FPIs) holdings in stock market, the country can attract more foreign capital.

Explanation:

A derivative product is defined by the fact that its value is derived from the value of one or more underlying variables. It can be related to various financial instruments such as equities, currencies, or commodities. Options A, B, and C provide additional information about derivatives but do not capture the fundamental definition of a derivative as a product whose value is derived from underlying variables.

Explanation:

In interbank market, currency prices are quoted with two way price – the prices quoted for buying is called bid price and the price quoted for selling is called as offer or ask price.

These prices are always from the perspective of the market maker and not from the perspective of the price taker.

(The difference between bid and offer price is called as ‘spread’)

Explanation:

For exchange traded derivative contracts, the Clearing Corporation acts as a central counterparty to all trades.

Explanation:

Settlement means actual pay in or pay out to settle the contract.

The settlement could be of mark to market settlement which happens on daily basis or could be final settlement which happens at the expiry of the contract.

Explanation:

Explanation:

In the first leg of the spread trade : Bought at 60.20 and sold at 61.10. Here he has made a profit of 0.90

To reverse his position – In the second leg of his trade he sold at 59.90 and bought at 60.50. Here he has made a loss of -0.60

So overall he has made a profit of 0.90 – 0.60 = 0.30 X 1000 (lot size of USDINR)

= Rs 300 profit

Explanation:

The rate will be higher as the difference in interest rates will be added to the future price.

Explanation:

An order to buy a specified quantity of a security at or below a specified price or to sell it at or above a specified price is known as a Limit Price Order. This order type allows traders to set a specific price at which they are willing to buy or sell a security. The execution of the order occurs only if the market price reaches or surpasses the specified limit price.

Explanation:

In the case of the USDINR currency futures contract the tick size shall be 0.25 paise or 0.0025 Rupee. To demonstrate how a move of one tick affects the price, imagine a trader buys a contract (USD 1000 being the value of each contract) at Rs 67.7500. One tick move on this contract will translate to Rs 67.7475 or Rs 67.7525 depending on the direction of market movement.

The value of one tick on each USDINR contract is Rupees 2.50 (which is 1000 X 0.0025). So if a trader buys 5 contracts and the price moves up by 4 ticks, he makes Rs 50 (= 5 X 4 X 2.5)

Explanation:

The currency futures contracts on the SEBI recognized exchanges have one-month, two-month, and three-month up to twelve-month expiry cycles.

Therefore, these exchanges will have 12 contracts outstanding at any given point in time.

Explanation:

In order to avoid building up of huge open positions, the regulator has specified the maximum allowable open position limit across all members of the Exchange.

This monitoring is for both client level positions (based on the unique client code) and for trading member level positions.

So even at client level, the open position limits is as per fixed guidelines.

Explanation:

The difference between spot price and future price is usually the cost of carry (interest) and other factors.

On the expiry day, the cost of carry is almost nil, so the prices of future and spot tend to merge.

Explanation:

GDP represents the total market value of all final goods and services produced in a country during a given year. A GDP growth rate higher than expected may mean relative strengthening of the currency of that country, assuming everything else remaining the same.

More the development of a country, more will be the foreign capital inflows – leading to appreciation of the local currency.

Explanation:

Exchanges may not take up the following types of complaints

a. Complaints in respect of transactions which are already subject matter of Arbitration proceedings,

b. Complaints involving payment of funds and transfer of securities to entities other than Trading Member,

c. Claims for mental agony/harassment and expenses incurred for pursuing the matter with the ISC,

d. Claims for notional loss, opportunity loss for the disputed period or trade,

e. Complaints pertaining to trades not executed on the Exchange by the complainant,

f. Claims of authorized persons for private commercial dealings with the trading member,

g. Claims relating to transactions which are in the nature of loan or financing which are not within the framework defined by the Exchange.

Explanation:

To maintain governance and avoid conflicts of interest, it is a common regulatory practice that no trading or clearing member should be allowed simultaneously to be on the Governing Council of the currency futures segment and the cash/equity derivatives segment. This separation helps ensure fair and unbiased decision-making in both segments.

Explanation:

Arbitrageurs lock in a profit by simultaneously entering opposite side transactions in two or more markets.

Spread Trading (Calendar Spread) means risk off-setting positions in contracts expiring on different maturity dates in the same underlying taken simultaneously.

Explanation:

RBI-SEBI Standing Technical Committee on Exchange Traded Currency recommends product design, risk management and membership norms for currency futures.

Explanation:

When a Trading Member requires the facility of using a ‘Pro-account’ through trading terminals from more than one location, such Trading Member shall request the Exchange stating the reason for using the ‘Pro-account’ at multiple locations.

The Exchange may, on a case-to-case basis after due diligence, consider extending the facility of allowing the use of ‘Pro-account’ from more than one location.

Explanation:

To benefit from a bullish trend, Mr. Doshi has two options to use ie. either Short a Put or go long on a Call.

Shorting a put has limited benefits as profits are limited. As Mr. Doshi is expecting a strong bull trend, the best option is to long a call and get the full profits of the strong upward move.

Explanation:

In a CALL option, the buyer has the right to buy an agreed quantity of the underlying asset.

In a PUT option the buyer has the right to sell an agreed quantity of the underlying asset.

Explanation:

While entering orders on the trading system, TMs are required to identify the orders, whether proprietary (if own trades) or client (if entered on behalf of clients) through ‘Pro/Cli’ indicator provided in the order entry screen.

Explanation:

Break even point for a long put option is Strike Price – Premium

So 58.50 – 1.00 = 57.50 is the Break Even point.

Explanation:

The reference rates for USD/INR and other major currencies are computed and disseminated by the Financial Benchmarks India Private Limited (FBIL). FBIL is recognised by Reserve bank of India as an independent Benchmark administrator and has assumed the responsibility of computation and dissemination of reference rate for USD/INR and exchange rate of other major currencies.

FBIL computes and publishes the USD/INR, EUR/INR, GBP/INR and JPY/INR reference rates on a daily basis on all Mumbai business days at around 13:30 hours. (ie. 1:30 pm)

Explanation:

One unique feature of OTC forward market is the requirement of underlying trade contract before executing the forward contract. According to RBI guidelines, any resident Indian desiring to book a forward contract should have an underlying trade contract which could establish exposure to foreign currency. The amount and tenor of the contract booked has to be equal to or less than the amount and tenor of foreign exchange exposure as suggested by the underlying trade contract.

In the above question, the exporter can book a forward contract upto USD 25 million for a maximum maturity of 3 months.

Explanation:

A day order is an order which is valid for the day on which it is entered.

If the order is not executed during the day, the system cancels the order automatically at the end of the day

Explanation:

Positions during the day are monitored based on the ‘total open interest at the end of the previous day’s trade’.

Explanation:

Iteration means the action or a process of iterating or repeating.

The binomial option pricing model values options using an iterative approach utilizing multiple periods to value options.

The binomial option pricing model was developed by William Sharpe in 1978. It has proved over time to be the most flexible, intuitive and popular approach to option pricing. The binomial model represents the price evolution of the option’s underlying asset as the binomial tree of all possible prices at equally-spaced time steps from today under the assumption that at each step, the price can only move up and down at fixed rates and with respective simulated probabilities. This is a very accurate model as it is iterative, but also very lengthy and time consuming.

Explanation:

Options are classified into two types: – European options and American options

European options can be exercised by the buyer of the option only on the expiration date. American options can be exercised by the buyer any time on or before the expiration date.

In India, currently only European Options i.e. right to exercise option on specific date only, are allowed.

Explanation:

The Income-tax Act does not contain any provision or guidance for computation of turnover in Exchange traded derivatives trading.

The computation of turnover is a very important factor as the applicability of tax audit is determined on the basis of turnover. Also, if the taxpayer is opting for the presumptive taxation scheme under section 44AD (subject to total turnover not exceeding Rs. 2 crores), he can declare the profit at the rate of 6% of such turnover in case of receipts in cheque or any digital modes or 8% of turnover in case of cash receipts.

Explanation:

An important constituent of the securities market is a trading member/ stock broker who is a member of the stock exchange.

In India, investors cannot access the Exchange platform directly. They have to compulsorily trade through registered stock brokers/trading member of the Exchanges. Hence, stock brokers/trading members are one of the important intermediaries of securities market. A trading member is allowed to execute trades on his own account as well as on account of his clients.

Explanation:

In the trading system of exchanges, all orders come as ACTIVE orders into the order book. If they get a match, they will be executed immediately; else they will enter the order book according to their price and time as PASSIVE orders.

In other words, orders lying unmatched in the system are ‘passive’ orders and orders that come in to match the existing orders are called ‘active’ orders.

Explanation:

As per the Institute of Chartered Accountants of India (ICAI) guidance notes on Accounting for Derivatives Contract – All derivative contracts should be recognised on the balance sheet and measured at fair value.

Explanation:

In order to prevent erroneous order entry by members, operating ranges are kept at +/-3% of the base price for contracts with tenure upto 6 months and +/- 5% of base price for contracts with tenure greater than 6 months.

In the above question, the contract is for one month, so the operating range is +/- 3%

3% of 100 = 3

100 + 3 and 100 – 3 will be the operating range ie. 103 and 97.

Explanation:

Depending upon the gap between trade and value date, forex trading can either be categorized as ‘Cash’, ‘Tom’ or ‘Spot’ transaction

Ready or cash – The transaction to be settled on the same day.

Tom – The delivery of foreign exchange to be made on the business day next to the date of transaction.

Spot – The most important value date is the “spot” value date, which is settlement after two business days.

Explanation:

The formula for Interest Rate Parity is :

Future Rate = Spot Rate X (1 + Interest Rate of Quoted Currency) /

( 1 + Interest Rate of Base Currency)

= 1.5 X ( 1 + 0.04 ) / ( 1 + 0.01 )

= 1.5 X ( 1.04 / 1.01)

= 1.5 x 1.0297

= 1.5445

Other method to calculate :

The difference betwwen the interest rates is 3 % ( 4% – 1%)

3 % of 1.5 = 0.045

So the appx. one year future rate = 1.5 + 0.045 = 1.545

Explanation:

Seller of option receives the premium with obligation to sell/ buy the underlying asset, if the buyer exercises his right.

Seller has the obligation and not the right to buy or sell an underlying asset – depending on the buyer exercising his right.

Explanation:

Speculators/Traders try to predict the future movements in prices of underlying assets and based on the view, take positions in derivative contracts.

Explanation:

Currency risks could be hedged mainly through forwards, futures, swaps and options. Of these currency futures are traded only on exchanges. Rest can be Over the Counter (OTC) or on exchanges.

Explanation:

Currency risks could be hedged mainly through forwards, futures, swaps and options. Of these currency futures are traded only on exchanges. Rest can be Over the Counter (OTC) or on exchanges.

Explanation:

The mode of settlement for USDINR, EURINR, GPBINR AND JPYINR is cash settled in Indian Rupees.

Explanation:

The payoff graph for futures displays a linear or symmetrical style. This means there are infinite possibilities for getting profits and losses through futures.

In case of futures contracts for Currency, Stocks, Stock index etc, both long as well as short position has unlimited profit or loss potential. This results into linear pay offs for futures contracts.

Explanation:

In case of futures, it is an obligation on both buyer as well as seller to settle the contract, however in option the buyer of an option has right but not the obligation to buy/sell the underlying asset.

‘Foreign exchange option (Currency Option)’ is an option that gives the buyer the right, but not the obligation, to buy or sell an agreed amount of a certain currency with another currency at a specified exchange rate on or before a specified date in the future.

Explanation:

The unabsorbed loss can be carried forward up to 8 assessment years. It can be set off only against the business income in the subsequent years.

Explanation:

Vertical spreads are created by using options having same expiry but different strike prices.

Bullish Vertical Spread Using Puts – Lets assume a trader is bullish on USD against INR, hence, the trader would like to short a put option of USDINR. If prices go up, trader will end up with the premium on sold puts. However, in case prices go down, the trader would be facing risk of unlimited losses. In order to protect to his downside, he may buy a put option with a lower strike. While this would reduce his overall upfront premium, benefit would be the embedded insurance against unlimited potential loss on short put. This is a net premium receipt strategy.

Explanation:

As per Income Tax rules – A transaction is deemed as speculative if it is periodically or ultimately settled otherwise than through actual delivery or transfer. However, Section 43(5) has specifically excluded certain derivative transactions from the meaning of speculative transaction as these instruments are used for hedging underlying assets.

Further, an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange shall not be deemed to be a speculative transaction. Thus, income or loss from dealing in exchange traded currency derivatives shall be deemed as normal business income (non-speculative business) even though delivery is not effected in such transactions.

Explanation:

Clients can place orders over Phone, Internet (Internet trading can take place through order routing systems, which will route client orders to exchange trading systems for execution), Direct Market Access (This allows brokers to offer clients direct access to the exchange trading system through the broker’s infrastructure without manual intervention by the broker).

Explanation:

Clearing Corporation acts as a legal counterparty to all trades in Currency Derivatives Segment of the Exchange and also guarantees their financial settlement.

Explanation:

Clearing Bank acts as an important intermediary between a clearing member and the Clearing Corporation. Every clearing member needs to maintain an account with any of the empaneled clearing banks.

The clearing accounts are to be used exclusively for clearing & settlement operations

All transactions of pay-in/pay-out of funds are carried out by these clearing banks. The pay-in obligation details are passed on to the clearing banks by clearing corporation, who then debit the clearing member account.

Closure of a Clearing Bank Account requires prior permission of Clearing corporation.

Explanation:

An option is said to be in the money, if on exercising it, the option buyer gets a positive cash flow. A call option would be in the money, if underlying price is higher than the strike price and similarly a put option would be in the money, if underlying price is lower than the strike price.

Explanation:

A market order is where a trader purchases or sells their contracts at the best market price available across the market depth to complete the order quantity/lot.

Explanation:

The person has invested Rs 1,00,000 at 16% . So after one year he will receive :

100000 X 16% = Rs 1,16,000

One year premium for USD is 4%

So the future price of USD is 70 x 4% = 72.80

Therefore, USD which he will have after one year = 116000 / 72.80

= 1593.40

Explanation:

Over the last three decades, the derivatives market has seen a phenomenal growth. Some of the factors driving the growth of financial derivatives are:

1. Increased volatility in asset prices in financial markets,

2. Increased integration of national financial markets with the international financial markets,

3. A significant growth of derivative instruments has been driven by technological breakthrough. Advances in this area include the development of high-speed processors, network systems and enhanced method of data entry.,

4. Development of more sophisticated risk management tools, providing a wider choice of risk management strategies, and

5. Innovations in the derivatives markets, which optimally combine the risks and returns over a large number of financial assets, leading to higher returns, reduced risk and lower transactions costs as compared to individual financial assets.

Explanation:

In order to avoid building up of huge open positions, the regulator (SEBI) has specified the maximum allowable position limit at client level, member level etc.

Explanation:

Stock Exchanges / Clearing Corporation shall ensure that the stock brokers are mandatorily put in risk-reduction mode when specific percent (currently 90%) of the stock broker’s/clearing member collateral available for adjustment against margins gets utilized on account of trades that fall under a margin system.

All unexecuted orders shall be cancelled once stock broker breaches 90 percent collateral utilization level.

Explanation:

The right to buy the asset is called call option. The buyer of the call option has the right to buy the asset from the seller of the call option.

Explanation:

Derivatives consists of Forwards, Futures, Options, Swaps etc.

(Swaps are, broadly speaking, series of forward contracts)

Explanation:

Option Value = Intrinsic Value + Time Value

Option premium consists of two components : intrinsic value and time value

Intrinsic value refers to the amount by which option is in the money.

Time value is directly proportional to the length of time to expiration date of the option.

Explanation:

The breakeven point for a Call Option buyer is the Strike Price + Premium paid

= 75.5 + 0.3 = 75.8

Explanation:

SEBI introduced the concept of Interoperability among Clearing Corporations which necessitates linking of multiple Clearing Corporations. Inter-operability among Clearing Corporation (CC) has enabled a Clearing Member to select the Clearing Corporation of its choice to clear and settle trades executed in multiple exchanges.

The interoperability framework is applicable to all the recognised clearing corporations excluding those operating in International Financial Services Centre (IFSC) and all the products available for trading on stock exchanges, except commodity derivatives, made available under this framework. Hence, interoperability is also applicable to Currency Derivatives Segment.

Explanation:

Operational risk is the risk of monetary loss resulting from inadequate or failed internal processes, manual and systems error or external events.

For the stock broker, operations risks are essentially risk arises on account of handling of client assets, regulatory non-compliance, trading error, non-payment for buying or selling a scrip, non-delivery of scrip(s), denial of matched order by clients, sudden closure of banks where funds are deposited etc.

Explanation:

For monthly contracts : The Expiry day is two working days prior to the last business day of the expiry month at 12:30 PM.

Explanation:

Going short means seliing. The person has sold at 99.75 and the refrence rate on expiry is 100.75. This means the price has risen and he will make a loss.

99.75 – 100.75 = 1 Loss

Explanation:

Option premium consists of two components – intrinsic value and time value. For an option, intrinsic value refers to the amount by which option is in the money i.e. the amount an option buyer will realize, before adjusting for premium paid. Therefore, only in-the-money options have intrinsic value whereas at-the-money and out-of-the-money options have zero intrinsic value.

Thus, for the same tenor, the premium for buying an In-the-money option will be higher than premium for buying an At-the-Money option.

Explanation:

Selling a PUT option means having an obligation to BUY an underlying asset.

The right to buy the asset is called Call option and the right to sell the asset is called Put option. A buyer of Put option has the right to sell the underlying asset at the strike price and the seller of put option is obliged to buy / take delivery of the underling asset at the strike price.

Explanation:

Base Minimum Capital is the deposit given by the member of the exchange against which no exposure for trades is allowed. The base minimum capital for trading members in cash, derivatives and debt segment is shown below:

1. Only Proprietary trading without Algorithmic trading (Algo) : Rs 10 Lacs

2. Trading only on behalf of Client (without proprietary trading) and without Algo : Rs 15 Lacs

3. Proprietary trading and trading on behalf of Client without Algo : Rs 25 Lacs

4. All Brokers with Algo : Rs 50 Lacs

Explanation:

With the view to ensure orderly trading and market integrity, SEBI prescribes stock exchanges to implement a mechanism of price bands/ operating ranges so as to prevent acceptance of orders placed beyond the price limits set by the stock exchanges.

For currency option, the price operating range shall be based on the DELTA of the options contract and calculated using the previous close price of the underlying and volatility. The price band so computed shall be subject to a minimum operating range which would be applicable for all contracts.

Explanation:

Guidance Note recognises the following three types of hedging;

– The fair value hedge accounting model is applied when hedging the risk of a fair value change of assets and liabilities already recognised in the balance sheet, or a firm commitment that is not yet recognised.

– The cash flow hedge accounting model is applied when hedging the risk of changes in highly probable future cash flows or a firm commitment in a foreign currency.

– The hedge of a net investment in a foreign operation.

Explanation:

Option premium consists of two components – intrinsic value and time value.

The difference between option premium and intrinsic value is the time value of that Option.

Explanation:

An Option is a contract that gives the right, but not an obligation, to buy or sell the underlying on or before a stated date and at a stated price. While buyer of option pays the premium and buys the right, writer/seller of option receives the premium with obligation to sell/ buy the underlying asset, if the buyer exercises his right.

Explanation:

When USD appreciates against INR or when INR depreciates against USD, the USDINR prices move up. (Eg. 81 to 82)

Therefore, buying USDINR futures will be the right trading strategy to benefit from this move.

The other three given options can be used when USD depreciates against INR.

Explanation:

The lot size for JPYINR is 100000 units but its for 100 Yen. Therefore per lot has to be multiplied by 1000 (100000/100)

In the above question, the price is Rs. 65

Contract Value = 65 x 10 (Lots) x 1000 = Rs. 650000

Explanation:

Accounting Standard (AS) 30, “Financial Instruments: Recognition and Measurement”, issued by the Council of the Institute of Chartered Accountants of India, specify about the accounting of derivatives contract.

The objective of this Standard is to establish principles for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items.

Explanation:

Interest rate derivatives have the largest market size globally followed by Currency derivatives etc.

Explanation:

Tick Size: It is minimum move allowed in the price quotations. The minimum trading increment or price differential at which traders are able to enter bids and offers is called as tick size. For example, if tick size for USDINR futures is Rs. 0.0025, the price entered by buyer and seller can be 74.9975, 75.0000, 75.0025 in multiple of Rs.0.0025.

Explanation:

Consumer Price Index (CPI) is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. The indicator measures level of inflation in the economy for the basket of goods and services which are generally brought by the people.

A rising CPI means a rising prices for goods and services and is an early indicator of inflation.

Explanation:

The lot size for JPYINR is 100000 units but its for 100 Yen. Therefore per lot profit or loss has to be multiplied by 1000 (100000/100)

In the above question, the purchase price is 64.50 and sale price is 64.60. So the profit is .10

0.10 x 30 (lots) x 1000 = Rs. 3000

Explanation:

In interbank market, currency prices are quoted with two way price. In a two way quote, the prices quoted for buying is called bid price and the price quoted for selling is called as offer or ask price. Note that these prices are always from the perspective of the market maker and not from the perspective of the price taker.

The price quoted by a market maker is valid for certain quantity of the currency pair and it may vary if the amount for which quote is sought is higher. Spread is an important parameter to note while assessing market liquidity, efficiency of market maker and market direction. Clearly, a narrow spread indicates a higher liquidity and higher efficiency of the market maker. In USDINR spot market, the spreads are wide at the time of opening and gradually start narrowing as the market discovers the price. Similarly, for a USD 100 mn transaction the spread is likely to be higher when compared to the spread for USD 1 mn transaction.

Explanation:

All of the above are allowed to become member of Currency Derivatives of Exchange subject to meeting all the regulatory and financial requirements.

Explanation:

The Clearing Corporation acts as a central counterparty i.e., it provides financial guarantees for all transactions executed on the Exchange. It acts as a legal counterparty to all trades through the process called Novation. Thus Clearing Corporation becomes the buyer to every seller and seller to every buyer.

If there is a default in this scenario, Clearing Corporation being counter party, is responsible for ensuring the settlement, thus managing risk and guaranteeing settlement to both the parties.

Explanation:

The last trading day is also known as expiry day or maturity date of contract. It is the day on which trading ceases in the contract. For all monthly currency futures contract expiry date is two working days prior to the last business day of the expiry month at 12:30 PM. On expiry date the trading in contract ceases at 12:30 pm and not on regular trading time of 5:00 pm or 7:30 pm.

Explanation:

Operational risk is the risk of monetary loss resulting from inadequate or failed internal processes, manual and systems error or external events.

For the stock broker, operations risks are essentially risk arises on account of handling of client assets, regulatory non-compliance, trading error, non-payment for buying or selling a scrip, non-delivery of scrip(s), denial of matched order by clients, sudden closure of banks where funds are deposited etc.

Explanation:

Income or loss from dealing in exchange traded currency derivatives shall be deemed as normal business income (non-speculative business) even though delivery is not effected in such transactions.

Consequently, any loss arising from Exchange traded derivatives can be set off against any normal business income. The business income of an assessee is charged to tax at normal rates as applicable in case of an assessee.

Explanation:

Option Buyer faces Unlimited risk: The maximum loss for an option buyer is the premium paid for the option. However, the potential gain is unlimited, especially for options like calls where the underlying asset’s price can increase significantly.

Option Seller faces Limited risk: The maximum loss for an option seller is limited to the difference between the strike price and the actual market price of the underlying asset, potentially multiplied by the number of contracts. The potential gain for the option seller is limited to the premium received.

Explanation:

In options, the buyer has only rights and no obligation and therefore he faces only the risk of premium paid. On the other hand, option seller is under obligation to buy or sell (depending on whether put option is sold or a call option is sold, respectively) and therefore faces unlimited risk. At the same time, the option buyer has chances to get unlimited upside and the option seller has limited upside equal to the premium received.

Explanation:

A DAY ORDER is valid until the end of the trading day. If the order is not executed by the end of the trading day, it will be canceled. This type of order is in force only for the specific trading day on which it is placed.

Explanation:

When you execute a trade to Buy EURINR and Sell USDINR of the same amount, it means you are taking a position where you expect the Indian Rupee (INR) to appreciate against the U.S. Dollar (USD). This is because, in the foreign exchange market, buying a currency pair involves the expectation that the first currency (EUR) will strengthen against the second currency (USD). In this case, it implies a view that the INR is expected to appreciate against the USD.

Explanation:

Only in a CALL OPTION, the buyer has the right to buy an agreed quantity of a asset .

In a put option the buyer has the right to sell an agreed quantity of the underlying asset.

So it depends on whether its a Call Option or Put Option to determine if the buyer has the right to buy the underlying asset.

Explanation:

When we short a Put option, we are of the belief that the underlying will rise.

Here EURINR spot is above the strike price ( it has risen) so it will be In the Money.

In the Money option – Profitable

Out of the Money option – Loss

At the money option – No P/L

Simple Facts :

Buying a Call – Bullish , Selling a Call – Bearish

Buying a Put – Bearish, Selling a Put – Bullish

Explanation:

The risk which the importer faces is the rise of USDINR as he has to make import payments in USD.

So to hedge this risk, he will go long in USDINR futures.

Explanation:

The last business day of the month will be termed as the Value date / Final Settlement date of each contract.

Explanation:

Being long in a put option means you have taken a bearish view and expect a fall in the underlying.

So when the spot price will fall there will be a rise in the option value leading to profits.

Explanation:

Demand and supply is usually the main criteria for pricing of products and services.

Explanation:

When a client defaults in making payments in respect of a daily settlement, the contract is closed out. The amount not paid by the client is adjusted against the initial margin.

Explanation:

The SC(R)A ie. the Securities Contract (Regulation) Act of 1956 is the act mainly responsible for governing the trading of securities in India.

Explanation:

Higher interest rates offer lenders in an economy a higher return relative to other countries.

Therefore, higher interest rates attract foreign capital and cause the exchange rate to appreciate.

Explanation:

Authorised Dealer Category I Banks

AD Category I Banks are permitted to become trading and clearing members of the currency derivatives market of recognized stock exchanges, on their own account and on behalf of their clients, subject to fulfilling the following minimum prudential requirements:

i) Minimum net worth of Rs. 500 crores.

ii) Minimum CRAR of 10 per cent.

iii) Net NPA should not exceed 3 per cent.

iv) Net profit for last 3 years.

Explanation:

Mr Sunny invested Rs 100000 at GBRINR 70. So he invested 100000 / 70 = 1428.57 GBP

His investment fell by 5 % ie.1428.57 less 5% = 1357.14 GBP

He repatriated this amount at GBPINR 77 = 1357.14 X 77 = 104500

So his money has grown from 100000 to 104500 in two years = 4.5 % profit

On a yearly basis its 4.5 / 2 = 2.25 %

Explanation:

The initial deposit which is required for initiating a currency future position is known as INITIAL MARGIN.

The initial security deposit paid by a member is considered as his initial margin for the purpose of allowable exposure limits.

Initially, every member is allowed to take exposures up to the level permissible on the basis of the initial deposit.

Explanation:

The currency futures segment of the Exchange has a separate Governing Council on which the representation of Trading /Clearing Members of the currency futures segment does not exceed 25 %