QUESTIONS AND ANSWERS ON CHAPTER
Q. In Futures Trading, the profits are received or losses or paid
1. In the delivery month
2. On daily settlement
3. On the day of expiry of the contract
4. On a weekly settlement basis.
A. The correct AnswerNO.2.
Q. Which of the following prices is used to compute MTM of a futures contract is case it is not traded on a given day ?
1. Closing price of the underlying
2. Closing price of the futures contract
3. Theoretical price
4. MTM is not levied in such cases
A. The Correct answer is NO.3.
Q. Exercise Settlement for option contracts takes place at
1. Settlement price of the futures contract
2. Closing price of the underlying
3. Closing price of the far month contract
4. Closing price of the options contract.
A. The correct answer is NO.2.
Q. On the first day of trading, settlement for futures contracts takes place at
1. Average high and low for the underlying on that day.
2. Closing price ofthe underlying.
3. Closing price of the far month contract.
4. Closing price of the options contract.
A. The correct answer is NO.2.
Q. In case of options, final exercise settlement is
1. Sequential
2. Random
3. Automatic
4. Voluntary
A. The correct answer is NO.3.
Q. Which of the following options contracts are compulsorily settled on the exercise date ?
1. In the money options contracts.
2. At the money options contracts.
3. Out of the Money Options contracts.
4. Deep out of the Money options contracts.
A. The correct answer is No.
Q. The Market Wide position limit for Stock futures and options is ?
1. Higher of 10% of non-promoter holding or 30 times the average traded quantity.
2. Lower of 10 % of non-promoter holding or 30 times the average traded quantity.
3. Higher of 1 % of non-jpromoter holding or 5 % of open interest in the market.
4. Lower of 1 % of non-jpromoter holding or 5% of open interest in the market.
A. The correct answer is NO.2.
Q. Assignment Margin is charged at
1. Client level
2. Trading Member level
3. Clearing Member level
4. Institution level
A. The correct answer is NO.3.
Q. A Trading Member Manojbhai took proprietary’ positions in November expiry contract. He bought 3000 trading units at 1210 and sold 240 at 1220. The End-of- the day settlement price for November expiry contract is 1220. If the initial Margin per unit for the November contract is Rs.100 per unit, then the total initial margin payable by Manojbhai would be
1. Rs.60,000
2. Rs.30,000
3. Rs.3,00,000
4. Rs.5,40,000
A. The correct answer is NO. 1.
• Q. Initial Margin is collected to
1. Make good losses on the outstanding position
2. Make good daily losses
3. Safeguard against potential losses on outstanding positions
4. None of the above
A. Initial margin seeks to safeguard against potential losses on outstanding positions.
The correct answer is number 3.
4. None of the above.
A. The correct answer is No. 1.
Q. On expiry of a derivatives contract, the settlement price is the
1. Spot price of the underly ing asset
2. Futures close price
3. Spot price plus cost of carry
4. None of the above.
A. On expiry, the settlement price is the spot price of the underlying asset (index closing value in case of index futures/options and closing price of stock on spot market in case of stock futures/options).
The correct answer is Number 1.
2. Rs.28,400
3. Rs.26,600
4. Rs.31,200
A. The spot market closes at 1023. He makes a profit of 1800 on the proprietary buy position (i.e., 1023 – 1020 x 600) and a profit of 3600 on the proprietary sell position (i.e., 1025 – 1023 x 1800). On client A’s account he makes a profit of Rs. 16,000 (i.e., 1023 – 1015 x 2000). On client B’s account he makes a profit of Rs. 11,000 (i.e., 1023 – 1016x 1600)andalossofRs.800(i.e., 1023 -1022 x 800). Hence his MTM profit is (1800+3600+16,000+ 11,200 – 800).
The correct answer is Number 1.
2. 800 units
3. 450 units
4. 400 units.
A. The correct answer is Number 4.
Q. What will be MTM profit or loss of Mr. Ramesh if he buys 800 @ 1040 and sells 600 @ 1045 ? The settlement price of the day is 1035.
1.4000 2.6000
3. + 6000
4. + 2000
A. The correct answer is No.4.
Q. Mr. Amar buys 600 units @ 1040 and sells 400units @ 1030 . The settlement price is 1030. What is his MTM profit or loss ?
1. – 6,000
2. + 6,000
A. Mr Amar makes a loss of Rs.6000 on his buy position and breaks even on his sell position. The correct answer isNo.3.
Q. Trading member Shantilal took proprietary purchase in a March contract. He bought 1600 units @ 1200. The end of the day settlement price was 1221. What is the outstanding position on which initial margin will be calculated ?
1.2700 units 2.1200 units 3.1500 units 4.400 units.
A. The correct answer is No.4.
Q. which is the outstanding position on which initial margin will be charged if no proprietary trading is done and the details of client trading are: one client buys 800 units at the rate of 1260. the second client buys lOOO units at the rate of 1255 and sells 1200 units at the rate of 1260
1.900 units
2. lOOOunits 3.800 units 4.2700 units.
A. One client buys 800, he is long 800. The second client buys 1000 and sells 1200, hence he is short 200. The outstanding position on which margin is charged is 1000 (i.e., 800 +200).
The correct answer is Number 2.
Q. The may futures contract on XYZ Ltd. closed at 3940 yesterday. It closes today at RS.3898.60. The spot closes at Rs.3800. Raju has a short position of 3000 in the May futures contract. He sells 2000 units of May expiring put options on XYZ with a strike price of Rs.3900 for a premium of Rs. 110 per unit. What is his net obligation to/from the clearing coiporation today ?
1. Payin of Rs.344200 ‘
2. Payout of Rs.6,40,000
A. On the short position of 3000 May futures contracts, he makes a profit of Rs. 1,24,200 {i.e., 3000 x (3940 – 3898.60) }. He receives Rs.2,20,000 on the put options sold by him. Therefore his net obligation from the clearing corporation is Rs.3,44,200.
The correct answer is Number 3.
Q. On April 1, Ms.Shetty has sold 400 calls on ABC ltd., at a strike price of Rs.200 for a premium of Rs.20 per call. On the cash market, ABC closes at Rs.240 on that day. If the call option is assigned to her on that day, what is her net obligation on 1st?
1. Payin of Rs. 16,000
2. Payin ofRs.8000
3. Payout ofRs.8000
4. Payout of Rs. 16,000
A. On the 400 calls sld by her, she receives a premium of Rs.8,000. However on the calls assigned to her, she losses Rs, 16,000 (400 x [240 – 200] ). Her payin obligation is Rs.8000.
The correct answer is NO.2.
| Futures/ UnderlyingContract descriptor Date Options (spot) Market
closing price closing price
|
1. Payin ofRs.5100
2. PayinofRs. 8700
3. Payout of Rs.3600
4. Payout of Rs.3000
A. On the long position of 500 June futures he makes a loss ofRs.l 000 [ 500 x (277-275)]. On the long position of200 July futures, he makes a profit of Rs.400 [ i.e., 200 x (280 – 278) ]. On the short position of300 June calls, he makes a loss of Rs.4500 [i.e., 300 x (275 – 260) ].
