NISM Series VIII: Equity Derivatives | Mega Mock Test 6 | 100 Solved MCQs

NISM Series VIII: Equity Derivatives - Mega Mock Test 6

🎓 ADVANCED PRACTICE SET:

This test contains 100 high-difficulty questions focusing on Technical Greeks, Settlement Hierarchy, and Hedging Scenarios. Click each question to reveal the logic!

Q 1. Can Professional Clearing members (PCM) act only on behalf of institutional clients?

A) Yes
B) No

View Answer & Logic

Answer: B) No

Explanation: PCMs can clear trades for their associate Trading Members as well as institutional clients.

Q 2. Trading members must maintain a higher level of Book networth than clearing members. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: Clearing Members carry the risk for all TMs under them, hence they require a higher networth (minimum Rs. 3 Crores).

Q 3. If you have a long or short position in a futures contract, it can be closed by initiating a reverse trade. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 4. The primary economic rationale for introducing forward contracts is to:

A) Help arbitrage
B) Help trading
C) Help hedging
D) Both A and C

View Answer & Logic

Answer: C) help hedgeing

Q 5. Initial margin paid by an option seller is shown under which head in the balance sheet?

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

View Answer & Logic

Answer: C) Current Assets

Q 6. A person who is bullish and a payer of premium is a:

A) Buyer of call
B) Seller of call
C) Buyer of put
D) Seller of put

View Answer & Logic

Answer: A) buyer of call option

Q 7. X sells 11 lots @ 6300. Y sells 13 lots @ 6450. Margin is 6% (Lot 50). Total margin for the broker?

A) Rs 2,51,550
B) Rs 4,59,450
C) Rs 6,40,000
D) Rs 3,74,900

View Answer & Logic

Answer: B) Rs 459450

Math: (6300*11*50*0.06) + (6450*13*50*0.06) = 2,07,900 + 2,51,550 = 4,59,450.

Q 8. Short 1 contract @ 1800 (Lot 50). Profit is Rs 5000. Closing action?

A) Buy @ 1900
B) Buy @ 1700
C) Sell @ 1900
D) Sell @ 1700

View Answer & Logic

Answer: B) Buying 1 Sept ABC futures contract at 1700

Q 9. Right to buy an asset on or before a particular date:

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

View Answer & Logic

Answer: C) American call option

Q 10. A call option gives the holder a right to buy how much?

A) Specified quantity or less
B) Specified quantity or more
C) Only the specified quantity
D) Any quantity

View Answer & Logic

Answer: C) Only the specified quantity

Q 11. Forward price if Cash = 425, Maturity = 12m, Interest = 12%?

A) 425
B) 482
C) 476
D) 437

View Answer & Logic

Answer: C) 476

Math: 425 + (425 * 0.12) = 425 + 51 = 476.

Q 12. Bearish on specific stocks but Bullish on the overall market. Strategy?

A) Sell specific stocks Fut + Sell Index Fut
B) Sell specific stocks Fut + Buy Index Fut
C) Buy specific stocks Fut + Sell Index Fut
D) Do nothing

View Answer & Logic

Answer: B) sell the shares of those specific companies in futures and buy index futures

Q 13. Higher exposure for a small margin is called:

A) Arbitrage
B) Leverage
C) Delta Hedging
D) Speculation

View Answer & Logic

Answer: B) Leverage

Q 14. Which problems of forwards are solved by futures?

A) Central monitoring
B) Settlement problems
C) Counterparty risk
D) All of the above

View Answer & Logic

Answer: D) all of the above

Q 15. Derivative losses can be carried forward for 12 years. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: They can be carried forward for **8 years**.

Q 16. Short Call can be closed by taking long Put of same series. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: You square off a position with the SAME type of instrument (Call with Call).

Q 17. Which complaint can the exchange redress?

A) Notional loss
B) Trades not on exchange
C) Private commercial dealings
D) Excess brokerage

View Answer & Logic

Answer: D) Excess Brokerage charged by Trading Member / Sub-broker

Q 18. Ravi buys 350 Call @ 20. Spot @ 310 on expiry. Action?

A) Exercise
B) Not exercise
C) Depends on liking
D) Depends on being in town

View Answer & Logic

Answer: B) not to exercise the option

Q 19. TMs require higher Capital Adequacy than CMs. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 20. Sold Call (Strike 200) for 12. Max loss?

A) 200
B) 188
C) 12
D) Unlimited

View Answer & Logic

Answer: D) Unlimited

Q 21. Investor protection fund for derivatives is:

A) Same as cash
B) Independent of cash
C) Contributed by Finance Ministry
D) Non-existent

View Answer & Logic

Answer: B) Independent of that of cash segment

Q 22. Contract size is defined by:

A) Broker
B) Exchange
C) Parties
D) SEBI

View Answer & Logic

Answer: B) The Stock Exchange

Q 23. In Options, the SELLER pays upfront premium. True or False?

A) True
B) False (paid on maturity)
C) False (paid by buyer)
D) None

View Answer & Logic

Answer: C) False as the premium is paid by the buyer and not the seller

Q 24. MTM margin debits for index options are:

A) Weekly
B) Daily
C) Fortnightly
D) Every Friday

View Answer & Logic

Answer: B) daily basis

Q 25. Calendar spread far month contract becomes ______ when near month expires.

A) Long
B) Hedged
C) Naked
D) Short

View Answer & Logic

Answer: C) naked position

Q 26. Main objective of derivatives is to enable participants to:

A) Trade
B) Manage risks
C) Speculate
D) Arbitrage

View Answer & Logic

Answer: B) Manage the risks

Q 27. Higher the interest rate, the higher the CALL premium. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 28. A buyer/holder of an option has:

A) Obligation no right
B) Right no obligation
C) Right and obligation
D) None

View Answer & Logic

Answer: B) the right but not the obligation

Q 29. TMs on derivative segment are NOT required to register with SEBI. True or False?

A) False
B) True

View Answer & Logic

Answer: A) False

Q 30. Principle making trading possible for those not wanting delivery:

A) Exchange traded
B) Price uncertainty
C) Standardisation
D) Cash settlement

View Answer & Logic

Answer: D) Cash settlement

Q 31. Opening day of April series on NSE Index Futures:

A) Last Fri of March
B) Last Fri of April
C) Last Fri of Jan
D) Last Fri of Feb

View Answer & Logic

Answer: C) Last Friday of Jan month

Explanation: Contracts exist for Near, Next, and Far months. When Jan expires, April is introduced.

Q 32. Operational risks include:

A) Calamities
B) Inadequate contingency planning
C) Power failure
D) All of the above

View Answer & Logic

Answer: B) inadequate contingency planning (as per specific classification)

Q 33. Total outstanding/unsettled contracts is "OPEN INTEREST". True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 34. CC can use client margins for CM's proprietary dues. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 35. CM deposited 75L assets. Liquid Networth requirement is 50L. Trading margin?

A) 75
B) 50
C) 25
D) 125

View Answer & Logic

Answer: C) 25

Q 36. Efficient cash market is required for efficient futures market. Yes or No?

A) Yes
B) No

View Answer & Logic

Answer: A) Yes

Q 37. Price Fut increases. Short mark-to-market margin is credited for gain. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: Price increase is a loss for short positions, hence debited.

Q 38. Capital adequacy for derivative brokers is same as cash market. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 39. Change in premium for unit change in Risk-free interest rate is:

A) Volatility
B) Price
C) interest rate
D) Liquidity

View Answer & Logic

Answer: C) Risk free interest rate (Rho)

Q 40. Ask price is the price at which:

A) CC settles
B) Trader sells share
C) Trader purchases share
D) Either buy or sell

View Answer & Logic

Answer: B) the trader is prepared to sell the share

Q 41. Individual stock F&O allowed on:

A) Few selected stocks
B) All stocks
C) Scrips > 100
D) Listed on all exchanges

View Answer & Logic

Answer: A) A few selected stocks only

Q 42. Higher volatility = higher initial margin. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 43. CM networth is higher than non-clearing member. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 44. Client money should be in a separate account. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 45. Active members must contribute initially to TGF. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 46. Interest rate increase will:

A) Increase put premium
B) Decrease put premium
C) No effect
D) Auto expire

View Answer & Logic

Answer: B) decrease the premium on put options

Q 47. Party agreeing to sell in a forward is in a:

A) Long
B) Sq-off
C) Short
D) Trade-off

View Answer & Logic

Answer: D) a trade off position (contextually per specific question phrasing)

Q 48. Client1 buys 12. Client2 sells 10. TM exposure?

A) 22
B) 2
C) 12
D) Depends on past

View Answer & Logic

Answer: A) grossed up at 22 contracts

Q 49. Call market price < exercise price. Option will:

A) Expire worthless
B) Seller exercise
C) Definitely exercise
D) None

View Answer & Logic

Answer: A) expire worthless

Q 50. Difference between strike and spot affects premium. Yes or No?

A) Yes
B) No

View Answer & Logic

Answer: A) Yes

Q 51. High initial margin level improves CC solvency. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 52. American put option gives buyer right but no obligation. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 53. Futures contract referred by its delivery month. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 54. Sold Put (Strike 400) for 32. Lot 500. Expiry @ 350. P&L?

A) -25000
B) -9000
C) 9000
D) 25000

View Answer & Logic

Answer: B) -9000 (Loss)

Math: (350 - 400) + 32 = -18. -18 * 500 = -9000.

Q 55. Tick 0.2, Multiplier 50. Tick value?

A) 50
B) 100
C) 10
D) 2.50

View Answer & Logic

Answer: C) Rs 10

Q 56. Securities given as liquid assets are:

A) MTM periodically
B) Not MTM
C) Depends on stock exchange
D) None

View Answer & Logic

Answer: A) marked to market on a periodical basis

Q 57. Contract month means:

A) Month of transaction
B) Month of expiry
C) Month of beginning
D) None

View Answer & Logic

Answer: B) Month of expiry of the futures contract

Q 58. Initial margin is calculated based on:

A) 5-day average move
B) VaR based margining
C) Fixed 25%
D) Black & Scholes

View Answer & Logic

Answer: B) Value-At-Risk (VAR) based margining.

Q 59. Daily Trading Price Limits define max % contract can rise/fall. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 60. For portfolio hedging, index based derivatives are more cost effective. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 61. CM is responsible to exchange for his TMs positions. True or False?

A) False
B) True

View Answer & Logic

Answer: B) True

Q 62. Default in derivatives won't be treated as default in cash segment. True or False?

A) False
B) True

View Answer & Logic

Answer: A) False

Q 63. High margins make derivatives trading expensive. Yes or No?

A) Yes
B) No

View Answer & Logic

Answer: A) Yes

Q 64. Risk unique to particular company/industry is:

A) Unsystematic
B) Systematic
C) Arbitrage
D) interest rate

View Answer & Logic

Answer: A) Unsystematic Risk

Q 65. Clearing can be done by:

A) TMs
B) CMs
C) Both
D) None

View Answer & Logic

Answer: B) by the clearing members

Q 66. In an ITM Put option:

A) Strike < Market
B) Exercise = Market
C) Strike > Market
D) Strike = 0

View Answer & Logic

Answer: C) strike price would be higher than the market price

Q 67. Delta measures premium change for unit change in:

A) Volatility
B) Interest rates
C) Time
D) Spot Price

View Answer & Logic

Answer: D) spot price of underlying asset

Q 68. In OTM Put option:

A) Strike > Market
B) Exercise = Market
C) Strike < Market
D) Strike = 0

View Answer & Logic

Answer: C) Strike price would be lower than the market price

Q 69. Liquid assets criterion for PCM is diff from TCM. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 70. Sold Fut @ 354 (Lot 900). Bought back @ 341. P&L?

A) 11700 Profit
B) -11700 Loss
C) 8300 Profit
D) -8300 Loss

View Answer & Logic

Answer: A) Rs 11700

Q 71. Profit on short Sept futures if square off by:

A) Buy Oct Fut lower
B) Sell Sept Fut lower
C) Buy Sept Fut lower
D) Sell Oct Fut lower

View Answer & Logic

Answer: C) he square of this short position by buying the September future at lower price

Q 72. Which is NOT index application?

A) Derivatives
B) ETFs
C) Private Equity
D) Index funds

View Answer & Logic

Answer: C) private equity funds

Q 73. Option contracts are NOT symmetrical in rights/obligations. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 74. Time/Intrinsic value are always positive or zero. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 75. Gain/loss realized daily in:

A) Forwards
B) Swaps
C) Futures
D) Cash Market

View Answer & Logic

Answer: C) Future market contracts

Q 76. Brokers allowed to fund client margin. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 77. Position limits prevent:

A) Undue influence by individual/group
B) Govt influence
C) SEBI direction
D) High networth direction

View Answer & Logic

Answer: A) prevent the market being unduly influenced by the activities of an individual/group of investors

Q 78. Seller of Put gains if price:

A) Decreases
B) Increases
C) Same
D) B and C

View Answer & Logic

Answer: D) Both 2 and 3

Q 79. Portfolio with 50 stocks is twice as risky as 100 stocks. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: Risk decreases as diversification (number of stocks) increases, but not linearly by "double".

Q 80. Buys low strike Call, Sells high strike Call. Strategy?

A) Bull Spread
B) Bear Spread
C) Butterfly
D) Calendar

View Answer & Logic

Answer: A) Bull Spread (Bull Call Spread)

Q 81. Futures more risky than equity due to:

A) High leverage
B) High pressure
C) Volatility
D) Liquidity

View Answer & Logic

Answer: A) high leverage

Q 82. Institutional investors pay higher margins. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 83. Derivative segment governed by same council as cash. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 84. Buy futures, price drops. Result?

A) Profit
B) Loss
C) Incomplete
D) None

View Answer & Logic

Answer: B) Make a loss

Q 85. Stock price is price of:

A) Near month Fut
B) Exercise price
C) Strike price
D) Underlying in spot

View Answer & Logic

Answer: D) the price of the underlying in the spot market

Q 86. Naked call means writer doesn't own underlying. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 87. Factors influencing option pricing:

A) Time to expire
B) Volatility
C) Dividend payout
D) All

View Answer & Logic

Answer: D) all of the above

Q 88. Cash dividends decrease Put values. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: Dividends decrease spot price on ex-date, which **increases** Put value.

Q 89. Writer of an option receives premium and has obligation. True or False?

A) Obligation only
B) Receives premium only
C) Has choice
D) Both A and B

View Answer & Logic

Answer: D) Both 1 and 2

Q 90. Daily settlement prices decided by:

A) CC
B) SEBI
C) Brokers
D) RBI

View Answer & Logic

Answer: A) Clearing Corporation

Q 91. Max loss for buyer is premium, true for:

A) All types
B) American only
C) European only
D) None

View Answer & Logic

Answer: A) true for all types of options

Q 92. If CM defaults, clients margin remain unaffected. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 93. Futures leave very little open to negotiation except price. True or False?

A) False
B) True

View Answer & Logic

Answer: B) True

Q 94. Shorter time to maturity = higher time value. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 95. Anand buys at market price. Instruction is:

A) Arbitrage
B) Limit
C) Stop Loss
D) Market Order

View Answer & Logic

Answer: D) market order

Q 96. Client registration form contains:

A) Investment objectives
B) Background
C) Beneficial identity
D) All

View Answer & Logic

Answer: D) all of the above

Q 97. Mandatory document to give client opening account:

A) Full SEBI laws
B) Risk disclosure document
C) Rules of exchange
D) SEBI guidelines

View Answer & Logic

Answer: B) Risk disclosure document

Q 98. 'ASK' price is always:

A) Greater than bid
B) Equal to bid
C) Lower than bid
D) None

View Answer & Logic

Answer: A) greater than the bid price

Q 99. मोहन buys 500 bags @ 800 directly from सोहम for future delivery. Contract is:

A) Options
B) Forwards
C) Futures
D) Swaps

View Answer & Logic

Answer: B) Forwards

Q 100. Terminating future by equal/opposite trade is:

A) Netting
B) Offsetting
C) Hedging
D) MTM

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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