Which of the following is NOT a derivative instrument?

Options:

A. Futures | B. Options | C. Bonds | D. Swaps

The most commonly used underlying in Indian derivatives markets is:

Options:

A. Bonds | B. Equity | C. Commodities | D. Currency

A forward contract is traded:

Options:

A. On stock exchanges | B. Over the counter | C. In banks only | D. In commodity markets only

Standardized derivative contracts are traded on:

Options:

A. Exchanges | B. Banks | C. Insurance Companies | D. Mutual Funds

Futures Market: Futures contracts are:

Options:

A. Customized | B. Standardized | C. Illegal | D. Non-tradable

The party that agrees to buy the asset in a futures contract is called:

Options:

A. Short Position | B. Long Position | C. Writer | D. Arbitrageur

The party that sells a futures contract takes:

Options:

A. Long Position | B. Short Position | C. Hedge Position | D. Cash Position

Futures contracts are settled daily through:

Options:

A. Mark-to-Market | B. Netting | C. Hedging | D. Clearing

Initial margin is collected to:

Options:

A. Generate Profit | B. Cover Potential Losses | C. Pay Taxes | D. Increase Liquidity

Options Basics: A call option gives the buyer the right to:

Options:

A. Sell Asset | B. Buy Asset | C. Hold Asset | D. Cancel Trade

A put option gives the buyer the right to:

Options:

A. Buy Asset | B. Sell Asset | C. Hold Asset | D. Cancel Trade

The price paid to buy an option is called:

Options:

A. Margin | B. Premium | C. Strike Price | D. Settlement Price

Strike price means:

Options:

A. Market Price | B. Contract Price | C. Exercise Price | D. Settlement Price

Option buyer has:

Options:

A. Obligation | B. Right but no obligation | C. Unlimited obligation | D. No rights

Hedging: Hedging means:

Options:

A. Increasing risk | B. Eliminating risk completely | C. Reducing price risk | D. Speculating

A farmer using futures to lock price is:

Options:

A. Speculator | B. Hedger | C. Arbitrageur | D. Investor

Arbitrage means:

Options:

A. High-risk trade | B. Risk-free profit from price difference | C. Hedging | D. Gambling

Speculators aim to:

Options:

A. Reduce risk | B. Lock prices | C. Profit from price movement | D. Stabilize market

Options Valuation: Intrinsic value of a call option is:

Options:

A. Spot – Strike | B. Strike – Spot | C. Spot + Strike | D. Premium − Strike

Time value of option depends on:

Options:

A. Time to expiry | B. Strike price only | C. Dividend | D. Tax rate

Volatility affects option price:

Options:

A. Positively | B. Negatively | C. Not at all | D. Randomly

Market Infrastructure: The derivatives regulator in India is:

Options:

A. RBI | B. SEBI | C. IRDAI | D. NABARD

Clearing corporation guarantees:

Options:

A. Profits | B. Settlement | C. Dividends | D. Interest

Lot size refers to:

Options:

A. Minimum trading quantity | B. Maximum price | C. Margin size | D. Premium amount

Expiry and Settlement: Most stock futures in India expire on:

Options:

A. First Thursday | B. Last Thursday | C. Second Friday | D. Last Monday

Cash settlement means:

Options:

A. Delivery of shares | B. Cash difference settlement | C. Commodity delivery | D. Bank transfer only

Physical settlement means:

Options:

A. Cash settlement | B. Delivery of underlying asset | C. Margin adjustment | D. Price adjustment

Risk Concepts: Margin call occurs when:

Options:

A. Profit increases | B. Margin falls below maintenance level | C. Premium rises | D. Strike price changes

Leverage in derivatives means:

Options:

A. Lower risk | B. Small capital controlling large exposure | C. Higher taxes | D. Lower liquidity

Option Strategies: Buying a call is profitable when:

Options:

A. Market falls | B. Market rises | C. Market stable | D. Volatility falls

Buying a put is profitable when:

Options:

A. Market rises | B. Market falls | C. Market stable | D. Interest rates fall

Covered call strategy involves:

Options:

A. Buying stock + selling call | B. Selling stock + buying call | C. Buying stock + buying call | D. Selling stock + selling call

Protective put strategy:

Options:

A. Buy stock + buy put | B. Sell stock + buy put | C. Buy call + sell put | D. Sell call + sell put

Index Derivatives: Index derivatives are based on:

Options:

A. Single stock | B. Basket of stocks | C. Bonds | D. Gold

Popular Indian index derivative:

Options:

A. Nifty 50 | B. Gold ETF | C. Sensex bond | D. Bank loan

Index futures are settled by:

Options:

A. Delivery of stocks | B. Cash settlement | C. Gold delivery | D. Physical delivery

Greeks: Delta measures:

Options:

A. Time decay | B. Sensitivity to underlying price | C. Volatility change | D. Interest change

Theta measures:

Options:

A. Volatility change | B. Time decay | C. Price change | D. Interest rate

Vega measures sensitivity to:

Options:

A. Interest rate | B. Volatility | C. Dividend | D. Strike price

Miscellaneous: Derivatives market helps in:

Options:

A. Price discovery | B. Risk management | C. Liquidity | D. All of the above

Contract note is issued by:

Options:

A. Clearing corporation | B. Broker | C. Exchange | D. Regulator

A trader expecting price fall should:

Options:

A. Buy futures | B. Sell futures | C. Buy call | D. Buy stock

Deep ITM option means:

Options:

A. Strike price is significantly favorable compared to spot price (deep in-the-money) | B. Strike near spot | C. Strike unfavorable | D. Zero premium

ATM option means:

Options:

A. Spot = Strike | B. Spot > Strike | C. Spot < Strike | D. No strike

OTM option means:

Options:

A. Profitable | B. Option with no intrinsic value (cannot be exercised profitably) | C. Expired | D. Exercised

Maximum loss for option buyer is:

Options:

A. Unlimited | B. Premium paid | C. Margin | D. Strike price

Maximum loss for option seller can be:

Options:

A. Limited | B. Unlimited | C. Zero | D. Premium only

Futures price depends on:

Options:

A. Spot price | B. Interest rate | C. Time to expiry | D. All of the above

Derivatives help in transferring:

Options:

A. Ownership | B. Risk | C. Interest | D. Taxes

Which participant provides liquidity by continuously quoting buy and sell prices?

Options:

A. Hedger | B. Arbitrageur | C. Market maker | D. Investor

Basis in futures market means:

Options:

A. Futures price – Spot price | B. Spot price – Futures price | C. Spot + Futures | D. Strike price – Spot

If futures price is higher than spot price, the market is called:

Options:

A. Backwardation | B. Contango | C. Discount Market | D. Arbitrage Market

If futures price is lower than spot price, the market is:

Options:

A. Contango | B. Backwardation | C. Premium Market | D. Forward Market

Daily mark-to-market settlement reduces:

Options:

A. Market volatility | B. Counterparty risk | C. Liquidity | D. Brokerage

Which derivatives contract has unlimited profit potential for the buyer?

Options:

A. Put option | B. Call option | C. Futures | D. Swap

Maximum profit of a call option seller is:

Options:

A. Unlimited | B. Premium received | C. Strike price | D. Spot price

An option with no intrinsic value is:

Options:

A. ITM Option | B. ATM Option | C. OTM Option | D. Deep ITM

The clearing house for derivatives on the National Stock Exchange of India is:

Options:

A. NSE Clearing | B. SEBI Clearing | C. RBI Clearing | D. NSDL

A long futures position benefits when:

Options:

A. Price rises | B. Price falls | C. Volatility falls | D. Interest rate falls

Short futures position benefits when:

Options:

A. Price rises | B. Price falls | C. Price stable | D. Interest rates rise

Option seller is also known as:

Options:

A. Holder | B. Writer | C. Hedger | D. Trader

Volatility refers to:

Options:

A. Interest rate change | B. Price fluctuation | C. Dividend payment | D. Liquidity

Higher volatility generally leads to:

Options:

A. Lower option premium | B. Higher option premium | C. No change | D. Lower strike price

The underlying of NIFTY 50 derivatives is:

Options:

A. Single stock | B. Basket of 50 stocks | C. Commodity | D. Bond index

Futures contracts require:

Options:

A. Premium | B. Margin | C. Strike price | D. Coupon

Options buyer pays:

Options:

A. Margin only | B. Premium | C. Interest | D. Dividend

Which strategy benefits from high volatility?

Options:

A. Long straddle | B. Covered call | C. Protective put | D. Short call

A long straddle involves:

Options:

A. Buy call + buy put | B. Sell call + sell put | C. Buy call + sell put | D. Sell call + buy put

A short straddle strategy benefits when:

Options:

A. Market moves sharply | B. Market remains stable | C. Market crashes | D. Market rallies

Which option Greek measures time decay?

Options:

A. Delta | B. Gamma | C. Theta | D. Vega

Which Greek measures change in delta?

Options:

A. Gamma | B. Theta | C. Vega | D. Rho

Rho measures sensitivity to:

Options:

A. Volatility | B. Time decay | C. Interest rate | D. Strike price

A person has invested INR 100,000 in an Indian corporate bond for a year giving a return of 16% in one year. The person plans to use the proceeds from the maturity of corporate bond to fund his son's education on US. At the time of investing in the corporate bond, USDINR spot rate was 70 and one year premium was 4%. The person decides to hedge currency risk using USDINR one year futures. At the end of one year, how many USD can this person remit to his son.

Options:

A. 1320 | B. 1417 | C. 1083 | D. 1593

Which participant tries to profit from price differences across markets?

Options:

A. Hedger | B. Speculator | C. Arbitrageur | D. Investor