NISM Series VIII: Equity Derivatives | Mega Mock Test 4 | 50 Solved Questions

NISM Series VIII: Equity Derivatives - Mega Mock Test 4

📝 TEST OVERVIEW:

This test focuses on advanced concepts like Option Greeks (Delta, Vega, Theta), Bear Spreads, and Regulatory Compliance. Click each question to reveal the logic!

Q 1. Mr. Sam is an equity fund manager and is bearish on the stock market. How will he use this view to create a hedge?

A) Sell all his stocks
B) Decrease the NAV
C) Sell index futures
D) Buy index futures

View Answer & Logic

Answer: C) He will sell index futures

Explanation: A fund manager already holds a portfolio. To hedge against a fall, he shorts (sells) index futures so that profits from the futures offset losses in the stock portfolio.

Q 2. The minimum capital adequacy requirement for a derivative clearing member is higher than that of the spot market. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Explanation: Because derivatives involve higher leverage and systemic risk, SEBI mandates a higher financial cushion for clearing members.

Q 3. What will be the Delta for a Far Out-of-the-money (OTM) option?

A) Near 0
B) Near 1
C) Near -1
D) Near 2

View Answer & Logic

Answer: A) Near 0

Explanation: OTM options have very little chance of becoming profitable, so their price hardly moves when the underlying price changes.

Q 4. SEBI can suspend a broker if they fail to resolve investor complaints or indulge in price rigging. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 5. Can an equity-oriented mutual fund hedge its exposure by selling index futures?

A) Yes
B) No

View Answer & Logic

Answer: A) Yes

Q 6. A trader buys ABC futures at 768 and squares off at 778. Lot size is 1200. P&L?

A) Rs. 12,000 Profit
B) Rs. 12,00,000
C) Rs. -12,000
D) Rs. 10,000

View Answer & Logic

Answer: A) Rs. 12,000

Math: (778 - 768) * 1200 = 10 * 1200 = 12,000 profit.

Q 7. Which complaint can an Exchange take up for redressal?

A) Opportunity loss
B) Transactions outside exchange framework
C) Excess brokerage charged
D) Mental distress expenses

View Answer & Logic

Answer: C) Excess brokerage charged by a broker

Q 8. A trader takes a short position in a call without owning the underlying stock. This is:

A) Protective Put
B) Writing a naked call
C) Covered call
D) Butterfly

View Answer & Logic

Answer: B) Writing a naked call

Q 9. If three series of futures are open, how many calendar spreads are possible?

A) 4
B) 3
C) 2
D) 1

View Answer & Logic

Answer: B) 3

Q 10. ______ is the ratio of change in option premium for a unit change in volatility.

A) Rho
B) Theta
C) Delta
D) Vega

View Answer & Logic

Answer: D) Vega

Q 11. When a futures contract price decreases, whose margin account is debited?

A) Seller
B) Buyer
C) Both
D) Neither

View Answer & Logic

Answer: B) the buyer of futures contract will be debited for the loss

Q 12. A forward contract is a bilateral commitment between two parties. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 13. Derivative brokers must register with SEBI in addition to the stock exchange. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 14. 'Bulls' expect the market to fall. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 15. In forward contracts, minimum tick size and price limits are set by an authority. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: Forwards are OTC/private; no exchange authority regulates these terms.

Q 16. All Nifty 50 stocks are equally weighed in the index calculation. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: Nifty is Free-Float Market Cap weighted. Stocks with higher market cap have higher weights.

Q 17. CC gives exposure limits to Clearing Members based on the number of TMs they service. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 18. Arbitrage is the simultaneous buy/sell of an asset to profit from price discrepancies. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 19. Initial margin paid by an option seller is shown in the balance sheet under:

A) Current Assets
B) Current Liabilities
C) Fixed Assets
D) Fixed Liabilities

View Answer & Logic

Answer: A) Under Current Assets

Q 20. Which option allows exercise ON OR BEFORE a particular date?

A) European Call
B) European Put
C) American Call
D) American Put

View Answer & Logic

Answer: C) American call option

Q 21. Foreign Exchange (Forex) can be part of liquid assets for CC. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 22. Book networth criterion for PCM is the same as TCM. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: PCM requirements are higher.

Q 23. Theta is the rate of change in option premium for a unit change in:

A) Volatility
B) Price
C) Time to expiry
D) Interest rates

View Answer & Logic

Answer: C) time to expiry

Q 24. Unsystematic risk can be reduced through diversification. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 25. Futures prices are usually MORE transparent than forward prices. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 26. Interest rate increases leads to CALL premium increase. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 27. Spot is 337, Call Strike is 300. Intrinsic Value?

A) -37
B) 37
C) 0
D) 637

View Answer & Logic

Answer: B) 37

Q 28. Time value of an option is:

A) Bank rate
B) Volatility
C) Difference between IV and Premium
D) Time left to expiry

View Answer & Logic

Answer: C) its the difference between the intrinsic value and the premium

Q 29. Portfolio 25L, Beta 1.20. Complete hedge requires selling Nifty futures of:

A) 25L
B) 28L
C) 30L
D) 20L

View Answer & Logic

Answer: C) by selling Nifty futures of Rs 30 lacs

Math: 25 * 1.2 = 30.

Q 30. Stock Beta 0.7, Buy 3L. Complete hedge?

A) Sell 2.1L Nifty
B) Buy 2.1L Nifty
C) Buy 3L Nifty
D) Sell 3L Nifty

View Answer & Logic

Answer: A) Sell Rs 2,10,000 Nifty

Q 31. A derivative market primarily has speculators and hedgers. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 32. To buy futures, a client must:

A) Pay full value
B) Pay margins
C) Only own stock
D) None

View Answer & Logic

Answer: B) make the margin payments as calculated by the exchange

Q 33. Forward contracts are customisable. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 34. SCRA 1956 defines 'Securities' to include:

A) Gold
B) Derivatives
C) Commodities
D) Real Estate

View Answer & Logic

Answer: B) Securities (specifically Derivatives under SCRA)

Q 35. Strike price is the price at which the underlying may be bought/sold on exercise. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 36. SEBI can suspend a broker for failing to pay fees. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 37. Losses for a Call SELLER are unlimited. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 38. Trader sells futures at 100, price rises to 110. Result on squaring up?

A) Profit
B) Loss
C) NIL
D) Insufficient Data

View Answer & Logic

Answer: B) make a loss

Q 39. Quality of underlying in futures is standardized by:

A) RBI
B) SEBI
C) Exchange
D) Buyer/Seller

View Answer & Logic

Answer: C) Exchange

Q 40. Exchange Bye-laws are approved by SEBI. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 41. Both Ram and Shyam deposited same liquid assets. Ram has TMs in Mumbai, Shyam outside. Exposure?

A) Ram higher
B) Shyam higher
C) Equal
D) None

View Answer & Logic

Answer: C) Both Ram and Shyam will have the equal exposure limits

Q 42. Result in a Bear Spread:

A) Selling low strike Call, Buying high strike Call
B) Selling low strike Put, Buying high strike Call
C) Buying two puts
D) None

View Answer & Logic

Answer: A) Selling a Call of a lower strike price and buying a Call of a higher strike price

Q 43. T-Bills are permitted liquid assets. True or False?

A) True
B) False

View Answer & Logic

Answer: A) Yes

Q 44. Spot 347, Strike 325. Call premium 39. Intrinsic Value?

A) 0
B) 22
C) 39
D) 61

View Answer & Logic

Answer: B) 22

Math: 347 - 325 = 22.

Q 45. Exchange traded options are standardized. True or False?

A) True
B) False

View Answer & Logic

Answer: A) Standardized options

Q 46. Sold SBI futures at 260. Square off at 251. Lot 1000. Result?

A) 9000 Profit
B) -9000 Loss
C) 7500
D) -7500

View Answer & Logic

Answer: A) 9000 Profit

Q 47. Margins in futures are paid by BOTH buyer and seller. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 48. ITM option has positive intrinsic value. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 49. Order prices on trading system are EXCLUSIVE of brokerage. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 50. Simultaneous purchase in one market and sale in another for profit is:

A) Long trading
B) Arbitrage
C) Speculation
D) Jobbing

View Answer & Logic

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Dhaval Visariya

AMFI Registered Distributor (ARN-327925) | Software Developer & Finance Enthusiast

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Disclaimer: I am an AMFI Registered Mutual Fund Distributor. Views expressed here are for educational purposes. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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