NISM Series I: Currency Derivatives MockTest – Free Demo /10 NISM Series I: Currency Derivatives Mock Test – Free Demo 1 / 10 1. Tick size depends on – a) The Interest rates b) The Delta of the security c) Its fixed by the exchange d) Volume in that security Explanation:Tick Size: It is the minimum move allowed in the price quotations. Exchanges decide the tick sizes on traded contracts as part of contract specification. For eg. -Tick size for Nifty futures is 5 paisa. 2 / 10 2. If the liquid assets held by clearing member Mr. Ram exceed those of clearing member Mr. Shyam, which of the following statements is/are accurate? a) Mr Ram has a higher exposure level than Mr. Shyam b) Both Mr. Ram and Mr. Shyam have the same level of exposure c) Mr Shyam has a higher exposure level than Mr. Ram d) There is no need to maintain liquid assets Explanation:As per the rules of SEBI and Stock Exchanges,the notional value of gross open positions at any point in time in the case of all Futures and Options shall not exceed a particular percentage of the liquid networth of a member.So a member (Mr Ram) who keeps higher liquid assets as security and margin with the stock exchanges will get higher exposure limits. 3 / 10 3. How much Initial Margin does the broker need to collect from both traders, Mr. Raj and Mr. Rahul, who want to sell 10 contracts of the June series at Rs.5200 and buy 5 contracts of the July series at Rs.5250, respectively, given that the lot size for both contracts is 50 and the fixed Initial Margin is 10%? a) Rs 1,31,250 b) Rs 3,91,250 c) Rs 1,28,750 d) Rs 2,60,000 Explanation:Payment of Initial Margin by a broker cannot be netted against two or more clients. So he will have to pay the margin for the open position of each of his clients.So margin payable for Mr. Raj is : 10 x 5200 x 50 at 10% = Rs 2,60,000Margin payable for Mr. Rahul is : 5 x 5250 x 50 at 10% = Rs 1,31,250Total = Rs 3,91,250. 4 / 10 4. What is the term for a trading strategy in which a trader simultaneously purchases a call and a put option with the same strike price and expiration date? a) Short Straddle b) Calendar Spread c) Butterfly d) Long Straddle Explanation:To do a long straddle strategy one has to buy a call and a put option of the same strike price and expiry. Together, they produce a position which will lead to profits if the market / stock is very volatile and it makes a big move – either up or down.For eg- A person buys a Rs 200 call at Rs 30 and a Rs 200 put at Rs 20 of a stock. If the stock rises significantly the call will rise greatly but his put will fall by maximum Rs 20. So he makes a good profit. If the stock falls significantly, he loses his call money buy gains greatly in the put option as it rises.Thus the Long Straddle is used when a trader expects a big move in the stock – in any direction is ok. 5 / 10 5. When is the scheduled introduction date for the April index future contract on NSE among the following options? a) On the 1st trading day after last Thursday in March b) On the 1st trading day after last Thursday in January c) On the 1st trading day after last Friday in March d) On the 1st trading day after last Friday in March Explanation:There are always 3 contracts running. So for eg. we will have Jan-Feb-Mar contracts trading in January.When January contracts expire on last Thursday of January, on Friday the April contracts will be introduced and so we will have Feb-Mar-April contracts. 6 / 10 6. Closing a long position in a PUT option can be achieved by initiating a short position in a CALL option. a) True b) False Explanation:A long position in any option can be closed by selling that option and not in any other way.So a long position in a PUT option can be closed by selling that PUT option. 7 / 10 7. How can a long position in a CALL option be effectively terminated or offset? a) True b) False Explanation:A long position in any option can be closed by selling that option and not in any other way.So a long position in a CALL option can be closed by selling that CALL option. 8 / 10 8. What is the term for the strategy of purchasing a put option on a stock that you already own? a) Writing a covered call b) Calender spread c) Straddle d) Protective put Explanation:Protective Put is a a risk-management strategy that investors can use to guard against the loss of unrealized gains.The put option acts like an insurance policy – it costs money, which reduces the investor’s potential gains from owning the security, but it also reduces his risk of losing money if the security declines in value. 9 / 10 9. The intrinsic value, calculated as the variance between the Market Price and Strike Price of the option, is always non-negative. a) True b) False Explanation: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, if he exercises the option instantly.For call option which is in-the-money, intrinsic value is the excess of market price over the exercise price. For put option which is in-the-money, intrinsic value is the excess of exercise price over the market price. 10 / 10 10. A stock exchange employs online surveillance capabilities to monitor the __________. a) Volumes b) Prices c) Positions d) All of the above Explanation:All modern stock exchanges have highly developed online surveillance systems to monitor the volumes / position and prices of all listed products and also check any unusual activity etc. in them. Your score is 0% Restart quiz Exit
