NISM Series VIII: Equity Derivatives | Mega Mock Test 8 | 50 Solved Questions

NISM Series VIII: Equity Derivatives - Mega Mock Test 8

📝 TEST FOCUS:

This test focuses on Moneyness, Stop-Loss Order Math, and Clearing Member obligations. Use these 50 questions to sharpen your logic for the final exam!

Q 1. ‘ICICI Bank stock call and put option’ belongs to which of the following categories?

A) Cash market product
B) Derivative product
C) Money market product
D) Debt product

View Answer & Logic

Answer: B) Derivative product

Explanation: Options and Futures are derivatives as they derive their value from the underlying ICICI Bank stock.

Q 2. Whom does the Clearing Member need to consult for setting limits on the trading members clearing through him?

A) Clearing Corporation
B) SEBI
C) The respective Stock Exchange
D) No consultation is required

View Answer & Logic

Answer: D) No consultation is required

Explanation: Clearing Members have the authority to set their own risk limits for the Trading Members they clear for based on their own risk assessment.

Q 3. If the price of far month futures is LESS than the price of near month futures, it is called:

A) Reverse Hedging
B) Contango
C) Basis
D) Backwardation

View Answer & Logic

Answer: D) Backwardation

Explanation: When far-month contracts trade lower than current months, the market is in Backwardation, usually indicating high demand for the spot asset or expectations of falling prices.

Q 4. What does a seller of a Put Option expect?

A) An increase in price
B) No change in price
C) A decrease in price
D) Both A and B

View Answer & Logic

Answer: D) Both 1 and 2

Explanation: A Put seller is Bullish or Neutral. They profit if the price rises or stays stable (keeping the premium).

Q 5. What does a beta of more than 1 mean?

A) Stock moves twice as much as index
B) Stock moves less than index
C) Stock moves more than the index change %
D) Stock moves exactly as index

View Answer & Logic

Answer: C) It means that the expected percentage change in stock price will be more than the percentage change in index

Q 6. Sold call at Rs 250 strike, premium received Rs 16. Maximum possible loss?

A) Unlimited
B) Zero
C) Rs 250
D) Rs 234

View Answer & Logic

Answer: A) Unlimited

Explanation: A call seller has the obligation to sell. Since price can rise to any level, the loss is theoretically infinite.

Q 7. Clearing Corporation of an Exchange guarantees performance of contracts. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 8. In the derivatives segment, who has to pay the margins specified by the CC?

A) Clients
B) Arbitrageurs
C) Financial Institutions
D) All of the above

View Answer & Logic

Answer: D) All of the above

Q 9. Prop trades and Client trades must be completely segregated. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 10. In a forward contract, the potential loss on the position is:

A) Known
B) Unknown

View Answer & Logic

Answer: B) unknown

Q 11. Who appoints SEBI board members?

A) Stock Exchanges
B) Central Government
C) High Court
D) SAT

View Answer & Logic

Answer: B) The Central Government

Q 12. Can a long position in a Put be squared off by shorting a Call of same strike/expiry?

A) Yes
B) No

View Answer & Logic

Answer: B) No

Explanation: A long Put must be closed by selling (Shorting) the SAME Put contract.

Q 13. Profits/Losses in futures are paid ONLY on maturity. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Explanation: Profits/Losses are realized daily through the MTM process or whenever the contract is squared off.

Q 14. Mr. Ashu owns 100 shares @ 980. Max loss limit is Rs 1000. SL order price?

A) 990
B) 970
C) 980
D) 960

View Answer & Logic

Answer: B) Place a stop loss order for 100 shares of ABC at Rs 970 per share

Math: 1000 total loss / 100 shares = 10 pts. 980 - 10 = 970.

Q 15. Intrinsic value is always positive for ITM options and zero for OTM. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 16. Minimum net worth for Clearing Members?

A) 1 Crore
B) 3 Crore
C) 5 Crore
D) 10 Crore

View Answer & Logic

Answer: B) Rs. 300 Lakhs (Rs 3 Crore)

Q 17. Long call closed by taking long Put. True or False?

A) True
B) False

View Answer & Logic

Answer: B) False

Q 18. Market where Future Price > Spot Price is:

A) Maximization
B) Normalization
C) Backwardation
D) Contango

View Answer & Logic

Answer: D) Contango

Q 19. Client net position 250 Buy. CM net position 550 Sell. CM liability to CC?

A) 300
B) 800
C) 250
D) 550

View Answer & Logic

Answer: B) 800 contracts

Explanation: Prop and Client positions cannot be netted. 250 (Client) + 550 (Prop) = 800.

Q 20. Portfolio manager is BULLISH. Action?

A) Sell index futures
B) Sell call
C) Buy index futures
D) Sell portfolio

View Answer & Logic

Answer: C) He should buy index futures

Q 21. One can sell futures without owning the asset. True or False?

A) Yes
B) No

View Answer & Logic

Answer: A) Yes

Q 22. MTM is daily valuation of open positions at market price. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 23. If auction has no sellers for short delivery, the CC:

A) Cancels transaction
B) Holds another auction
C) Annulls trade
D) Closes out transaction

View Answer & Logic

Answer: D) The transaction is closed out

Q 24. Future price increases. What happens?

A) Seller debited loss
B) Buyer credited gain
C) Both 1 and 2

View Answer & Logic

Answer: C) Both 1 and 2

Q 25. 'Closing buy transaction' offsets:

A) Cross position
B) Short position
C) High position
D) Long position

View Answer & Logic

Answer: B) A short position

Q 26. An ideal index should contain ______ shares.

A) More than 50
B) Many
C) Few
D) As per index objective

View Answer & Logic

Answer: D) As per the objective of the index

Q 27. Spot 350. Call Strike 370. This option is:

A) ITM
B) OTM
C) ATM

View Answer & Logic

Answer: B) The spot price is Rs 350 and strike price is Rs 370 (OTM)

Q 28. Sugarcane farmer direct sale to factory in 2 months. Contract type?

A) Swapation
B) Future
C) Forward
D) None

View Answer & Logic

Answer: C) Forward Contract

Q 29. Buy 8 lots June Fut, Sell 6 lots July Fut. Non-spread open position?

A) 14
B) 2
C) 8
D) 6

View Answer & Logic

Answer: B) 2 lots

Explanation: 6 lots are hedged as a spread. Remaining 2 lots are naked open positions.

Q 30. European option exercised only on expiry. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 31. Who is eligible to clear trades in Index Options?

A) All TMs
B) All sub-brokers
C) Only registered CMs
D) Public banks

View Answer & Logic

Answer: C) Only members who are registered as clearing members with the derivative exchange

Q 32. Principal driver of stock index movement:

A) Inflation
B) Price movement in underlying shares
C) Interest rates
D) Currency rates

View Answer & Logic

Answer: B) Price movement in underlying shares

Q 33. High initial margins deter unqualified players. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 34. Bulls believe market will rise. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 35. When a futures contract is entered:

A) No margin exchanged between buyer/seller
B) Buyer pays seller margin
C) Seller pays buyer margin
D) Pay each other

View Answer & Logic

Answer: A) no margin is exchanged between the buyer and seller

Explanation: Margins are paid to the Clearing Corporation, not to the opposite party.

Q 36. Dealers/Sales personal in derivatives MUST pass SEBI certification. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 37. Derivatives underlying can be:

A) Bond
B) Derivative
C) Stock Index
D) All of the above

View Answer & Logic

Answer: D) All of the above

Q 38. Liquid assets can include cash, BGs, and Equity securities. True or False?

A) True
B) False

View Answer & Logic

Answer: A) Cash, Bank Guarantees, Equity Securities and other Cash Equivalents

Q 39. Adverse settlement difference for a seller is recognized as:

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

View Answer & Logic

Answer: B) Loss

Q 40. Short 1 Nifty Fut @ 5600. Profit realized Rs 5000 (Lot 50). Square off action?

A) Sell @ 5700
B) Buy @ 5700
C) Buy @ 5500
D) Sell @ 5500

View Answer & Logic

Answer: C) Buying 1 May Nifty futures contract at 5500

Math: 5000 profit / 50 lot = 100 points profit. Short needs lower price: 5600 - 100 = 5500.

Q 41. Sold Put (Strike 245) for 49. Max loss?

A) 206
B) 196
C) 49
D) NIL

View Answer & Logic

Answer: B) 196

Math: 245 (Strike) - 49 (Premium) = 196 (if stock hits zero).

Q 42. Option buyer cannot lose more than premium. True or False?

A) False
B) True (American only)
C) True (European only)
D) True (All types)

View Answer & Logic

Answer: D) True for all types of options

Q 43. 3 SBI call series (June, July, Aug) same strike. Lowest premium?

A) June
B) July
C) August
D) Same

View Answer & Logic

Answer: A) June

Explanation: Options with less time remaining have lower time value.

Q 44. CC can transfer defaulting member client positions to another solvent member. True or False?

A) True
B) False

View Answer & Logic

Answer: A) True

Q 45. Buy 8 March Fut, Sell 6 April Fut. Regular open position?

A) 14
B) 8
C) 2
D) 6

View Answer & Logic

Answer: C) 2

Q 46. _______ measures sensitivity to small price changes in underlying.

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

View Answer & Logic

Answer: A) Delta

Q 47. Which attracts margins?

A) Buyer of Put
B) Seller of Call
C) Seller of Put
D) Both B and C

View Answer & Logic

Answer: D) Both 2 and 3

Explanation: Option buyers only pay premium (limited risk). Sellers pay margins due to unlimited risk.

Q 48. Buy Call (Strike 140) @ 10. Expiry @ 168. Action?

A) Exercise
B) Not exercise
C) Depends on bank balance
D) Depends on experts

View Answer & Logic

Answer: A) To exercise the option

Q 49. Close Buy Call Jan 200 by selling PUT Jan 200. True or False?

A) True
B) False

View Answer & Logic

Answer: A) False

Explanation: To close a Buy Call Jan 200, you MUST sell the SAME Call Jan 200.

Q 50. Buy ABC Fut @ 75 (Lot 2000). Max loss Rs 3000 limit. SL sell price?

A) 74
B) 73.5
C) 76.5
D) None

View Answer & Logic

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Dhaval Visariya

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

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