NISM Series VIII | Equity Derivatives | Mock Test 2 (50 Solved MCQs)
Q 1. In Option Spreads there is a combination of options
constructed in such a way that there is limited profit or limited loss - State
True or False ?
- True
- False
CORRECT ANSWER: True Explanation: Option
Spreads involve combining options on the same underlying and of same type
(call/ put) but with different strikes and maturities. These are limited profit
and limited loss positions.
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Q 2. If the price volatility of the underlying stock is
high then the Put option will _____ .
- have
zero premium
- have
comparatively lower premium
- have
comparatively higher premium
- Volatility
does not have any effect on the Put options
CORRECT ANSWER: have comparatively higher premium Explanation:
Volatility is the magnitude of movement in the underlying asset's price, either
up or down. It affects both call and put options in the same way. Higher the
volatility of the underlying stock, higher the premium because there is a
greater possibility that the option will move in-the-money during the life of
the contract. Higher volatility = Higher premium, Lower volatility = Lower
premium (for both call and put options).
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Q 3. Its common to have derivatives contract without any
expiration date - State whether True or False ?
- True
- False
CORRECT ANSWER: False Explanation: Most
derivatives contract have an expiration date.
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Q 4. When a broker/dealer is doing trades in his own
account and also doing trades for their clients then these two trades have to
be completely segregated - State True or False?
- True
- False
CORRECT ANSWER: True Explanation: As per the
regulations by SEBI, a dealer or broker must maintain a clear segregation
between:
- Proprietary
trades (trades done on the dealer's or broker's own account)
- Client
trades (trades executed on behalf of clients) This is essential to:
- Prevent
conflicts of interest
- Ensure
transparency
- Avoid
misuse of client information or funds
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Q 5. Whom does the Clearing Member need to consult for
setting limits on the trading members clearing through him?
- Clearing
Corporation
- SEBI
- The
respective Stock Exchange
- No
consultation is required with anyone as the Clearing Member can set the
limits of his trading members on his own
CORRECT ANSWER: No consultation is required with
anyone as the Clearing Member can set the limits of his trading members on his
own Explanation: A trading terminal helps the Clearing Members to
monitor the open positions of all the Trading Members clearing and settling
through him. A Clearing Member may set limits for a Trading Member clearing and
settling through him. Clearing corporation assists the Clearing Member to
monitor the intraday limits set up by a Clearing Member and whenever a Trading
Member exceed the limits, it stops that particular Trading Member from further
trading.
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Q 6. Mr. Arvind is very bullish on the market. How ever
he feels some specific companies which he has in his portfolio will not perform
well in future. What strategy should he adopt?
- Sell
Index futures and Sell specific companies shares
- Buy
Index futures and Sell specific companies shares
- Sell
Index futures and Buy specific companies shares
- Do
nothing as markets are uncertain
CORRECT ANSWER: Buy Index futures and Sell specific
companies shares Explanation: Mr. Arvind should sell the shares of those
specific companies and buy index futures. By this he will profit when the index
rises and avoid losses on those specific companies if his view proves to be
correct.
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Q 7. ______ means the maximum exposures in terms of
number of options and futures contracts that an investor can hold on one side
of the market.
- Outstanding
Limit
- Market
Limit
- Position
Limit
- Upper
Limit
CORRECT ANSWER: Position Limit Explanation:
Position limits are the maximum exposure levels which the entire market can go
up to and each Clearing Member or investor can go up to. Position limits for
the entire market and Clearing Members and investors are defined by SEBI.
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Q 8. How can you close a short position in a futures
market?
- By
buying a Call Option
- By
entering into a suitable forward contract
- By
executing a purchase of the same futures contracts
- By
executing a sale of the same futures contracts
CORRECT ANSWER: By executing a purchase of the same
futures contracts Explanation: A short future contract ie. a sale
position can be squared up by buying the same contract in futures market and in
no other way.
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Q 9. In exercising call option on an index, the option
holder receives from the option writer, an amount equal to excess of spot price
(at the time of exercise) over the strike price of the call option - State
whether True or False ?
- True
- False
CORRECT ANSWER: True Explanation: When a
person buys a Call Option of an index, he is expecting the index to rise. On
exercise, if the spot price of the index is over and above the strike price at
which the buyer had bought the Call, he will receive the difference between the
spot price and strike price. In other words : A call option gives the holder
the right to buy at a fixed price (strike price). If, at exercise, the market
index price is higher than the strike price, the option has value. Since index
options are cash settled, the writer pays the holder the difference between the
spot price and the strike price.
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Q 10. What does hedging do?
- It
maximises business profits
- It
minimises business losses
- It
produces a more clearer outcome
- Hedging
can be used only in currency markets and not in equity markets
CORRECT ANSWER: It minimises business losses Explanation:
Hedging is a risk management strategy used by businesses or investors to reduce
the potential adverse effects of price movements in financial markets. It helps
minimize the risk of losses by taking an offsetting position in a related
asset, such as using derivatives (options, futures, swaps) to hedge against
price fluctuations in currencies, commodities, or equity markets.
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Q 11. A trader sells a futures contract and the price
rises. The trader will ______ .
- Make
a loss
- Make
a profit
CORRECT ANSWER: Make a loss Explanation: When
a trader sells a futures contract, they are taking a short position, meaning
they are betting that the price will fall. If the price rises, the trader will
have to buy back the contract at a higher price, resulting in a loss.
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Q 12. What does a beta of more than 1 mean ?
- It
means that the expected percentage change in stock price will be twice the
percentage change in index
- It
means that the expected percentage change in stock price will be less
percentage change in index
- It
means that the expected percentage change in stock price will be more than
the percentage change in index
- It
means that the expected percentage change in stock price equals the
percentage change in index
CORRECT ANSWER: It means that the expected percentage
change in stock price will be more than the percentage change in index Explanation:
Beta measures the sensitivity of a stock / portfolio vis-a-vis index movement
over a period of time, on the basis of historical prices. If Beta of a stock is
1, it means that a % change in the index will lead to equal % change in the
stock price. Therefore, if the Beta is more than 1, it indicates that the
security's price tends to be more volatile than the market.
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Q 13. Intrinsic value of an option is sum of Option
premium and Time value - State whether True or False?
- True
- False
CORRECT ANSWER: False Explanation: Intrinsic
value is basically the difference between Spot price and Strike price. Option
premium consists of two components - intrinsic value and time value For eg. If
the current option premium for a Rs 500 strike price Call option is Rs 70 and
the current spot price is Rs 550, than Rs 50 is the intrinsic value (550 -500)
and the balance Rs 20 (70 - 50) is the time value.
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Q 14. Which of these statements is True?
- Money
and securities deposited by clients can be attached for meeting the
brokers obligation on his proprietary account
- Money
and securities deposited by clients cannot be attached for meeting the
brokers obligation on his proprietary account
- Money
and securities deposited by clients can be attached as per the decision of
the clearing corporation
- Money
and securities deposited by clients can be attached as per the decision of
the Stock Exchange
CORRECT ANSWER: Money and securities deposited by
clients cannot be attached for meeting the brokers obligation on his
proprietary account Explanation: The securities or money deposited by
clients cannot be attached for meeting broker's obligation on his proprietary
account. The broker has to maintain separate client bank account for
segregation of client money. Also brokers should keep margins collected from
clients in a separate bank account.
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Q 15. The Intrinsic Value is zero for out-of-the money
options but always positive for in-the-money options - State True or False?
- True
- False
CORRECT ANSWER: True Explanation: Intrinsic
Value is the amount by which an option is in-the-money. Out-of-the-money (OTM)
options have no intrinsic value because exercising them would result in a loss.
In-the-money (ITM) options always have positive intrinsic value, since
exercising them yields a gain.
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Q 16. There is higher flexibility in fixing forward
contract specification as compared to futures contract specifications - State
True or False?
- True
- False
CORRECT ANSWER: True Explanation: Futures are
standardized contracts introduced by the exchanges. They have certain
limitations in the context of limited maturities, limited underlying set, lack
of flexibility in contract design and increased administrative costs on account
of MTM settlement etc. Forward contracts are customised between two parties and
there is complete flexibility in designing the contract specifications as per
mutual consent.
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Q 17. Speculator accepts the risks in search of profits -
State True or False?
- False
- True
CORRECT ANSWER: True Explanation: Speculators
try to predict the future movements in prices of stocks, commodities,
currencies etc and accordingly buy or sell. There is risk in such activities
but the speculators take these risks in order to make profits.
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Q 18. A Clearing Member has to deposit _______ to
clearing corporation which forms part of the security deposit.
- Rs.
50 lakhs
- Rs.
100 lakhs
- Rs.
150 lakhs
- Rs.
20 lakhs
CORRECT ANSWER: Rs. 50 lakhs Explanation:
Clearing Member Eligibility Norms
- Net-worth
of at least Rs.300 lakhs. The Net-worth requirement for a Clearing Member
who clears and settles only deals executed by him is Rs. 100 lakhs.
- Deposit
of Rs. 50 lakhs to clearing corporation which forms part of the security
deposit of the Clearing Member.
- Additional
incremental deposits of Rs.10 lakhs to clearing corporation for each
additional TM, in case the Clearing Member undertakes to clear and settle
deals for other TMs.
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Q 19. Exposure levels of Clearing Members are _______
correlated with the Liquid Assets maintained with the Clearing Corporation.
- Positively
- Negatively
- Not
related
- exponentially
CORRECT ANSWER: Positively Explanation:
Exposure levels of Clearing Members are positively correlated with the Liquid
Assets maintained with the Clearing Corporation. More the liquid assets
deposited with the Clearing Corporation, higher will be the exposure levels
available to the Clearing Member.
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Q 20. In case of ordinary cash dividends, on the
ex-dividend date, Call Option values will decrease - State True or False ?
- True
- False
CORRECT ANSWER: True Explanation: When a
company declares a cash dividend, the stock price generally drops by
approximately the dividend amount on the ex-dividend date. Since the price of
the underlying stock directly affects call option prices, a lower stock price
leads to a decrease in the value of the call option. This is because a call
option gives the holder the right to buy the stock at a fixed strike price, and
if the stock price drops, the intrinsic value and potential profitability of
the call option decrease. Thus, Call Option values will decrease when ordinary
cash dividends are declared.
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Q 21. In Index futures, an open position can be settled
by ______ .
- delivery
on maturity
- cash
settlement on maturity
- either
by cash or delivery on maturity
- exchange
for gold on maturity
CORRECT ANSWER: cash settlement on maturity Explanation:
Index futures are always cash settled on maturity i.e. the difference between
trade price and settlement price is received or paid.
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Q 22. The holder (Buyer) of a long position in a PUT
option will gain if the price of the underlying asset ______ .
- Increases
- Decreases
- Does
not change
- If
the option expires worthless
CORRECT ANSWER: Decreases Explanation: The
buyer of a Put Option is bearish. He believes that the price of the underlying
will fall. When the price falls, the value of the put option rises. So he will
benefit only if the price decreases. A put option buyer gains when the price of
the underlying asset falls below the strike price, because the right to sell at
a higher fixed price becomes valuable.
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Q 23. When the price of a future contract increases, the
margin account ______ .
- of
the buyer of futures contract will be credited for the gain
- of
the seller of futures contract will be debited for the loss
- Both
1 and 2
- None
of the above
CORRECT ANSWER: Both 1 and 2 Explanation: The
buyer of futures will have a notional gain and so his margin account
(Mark-to-market margin) will be credited by the notional gain amount. The
seller of futures will have a notional loss if the price rises and his margin
account (Mark-to-market margin) will be debited by the notional loss amount.
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Q 24. A Forward Contract ________ .
- can
be cancelled but only after the expiry date
- can
be cancelled if the counter party also agrees to it
- cannot
be cancelled
- can
be cancelled even without the consent of the counter party
CORRECT ANSWER: can be cancelled if the counter party
also agrees to it Explanation: Forwards are negotiated between two
parties and the terms and conditions of contracts are customized. Any
alteration in the terms of the contract or cancellation of the contract is
possible if both parties agree to it.
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Q 25. Suppose you are a trading member and have bought 14
contracts of April series index futures and sold 7 contracts of April series
index futures on your own account. What will be your exposure on these
transactions ?
- It
will grossed up to 21 contracts
- It
will be netted to 7 contracts
- Higher
of 14 and 7 ie. 14 contracts
- The
Stock Exchange can decide to either to gross up or net out the exposure
depending on the past record of the trading member
CORRECT ANSWER: It will be netted to 7 contracts Explanation:
Since its the same index futures contract, the exposure will be netted ie. 14 -
7 = 7 contracts.
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Q 26. A mutual fund manager is bearish on the market and
wishes to reduce its exposure to equities from 50% to 40%, without selling any
of his equity holdings. Can he sell index futures for it ?
- Yes,
he can sell index futures
- No,
Mutual funds are not allowed to sell index futures
CORRECT ANSWER: Yes, he can sell index futures Explanation:
FII and Mutual funds can buy/sell in futures subject to certain limits. FII
& MF position limit in all index futures contracts on a particular
underlying index is Rs. 500 Crores or 15 % of the total open interest of the
market in index futures, whichever is higher. This limit would be applicable on
open positions in all futures contracts on a particular underlying index. In
addition to the above, FIIs & MF's shall take exposure in equity index derivatives
subject to the following limits: a) Short positions in index derivatives (short
futures, short calls and long puts) not exceeding (in notional value) the
FII's/ MF's holding of stocks. b) Long positions in index derivatives (long
futures, long calls and short puts) not exceeding (in notional value) the
FII's/ MF's holding of cash, government securities etc.
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Q 27. For a derivative exchange, the networth requirement
for a clearing member is always less than that for a non clearing member -
State True or False ?
- True
- False
CORRECT ANSWER: False Explanation: In a
derivatives exchange, a clearing member bears settlement and counterparty risk
on behalf of other members. Because of this higher responsibility and risk
exposure, clearing members are required to maintain a higher net worth than
non-clearing members.
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Q 28. Theta is the rate of change in option premium for a
unit change in ______ .
- volatility
- price
of the underlying asset
- time
to expiry
- interest
rates
CORRECT ANSWER: time to expiry Explanation:
Theta is the change in option price given a one-day decrease in time to
expiration. It is a measure of time decay.
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Q 29. Futures prices are usually more transparent than
Forwards prices - State True or False ?
- True
- False
CORRECT ANSWER: True Explanation: A futures
contract is similar to a forward, except that the deal is made through an
organized and regulated exchange rather than being negotiated directly between
two parties. Since the futures are traded in an organised manner and mostly
done through screen based trading, they are much more transparent than
forwards.
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Q 30. Derivatives brokers/ dealers are expected to know
their clients and to exercise care to ensure that the derivative product being
sold by them to a particular client is suitable to his understanding and
financial capabilities - State True or False ?
- True
- False
CORRECT ANSWER: True Explanation: Derivatives
brokers/ dealers should avoid recommending opening futures/ options transaction
unless they have a reasonable basis for believing that the customer has such
knowledge and financial experience that he or she is capable of evaluating, and
financially able to bear, the risks of the transaction.
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Q 31. Is it true that a buyer of a CALL OPTION cannot
lose more than the option premium paid ?
- True
only for European options
- True
only for American options
- True
for all type of options
- False
for all type of options
CORRECT ANSWER: True for all type of options Explanation:
The maximum loss for buyer of any option is the premium paid.
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Q 32. Why does 'Screen based trading' has a edge over
'Floor trading'?
- The
technology needs are lower
- There
is no need to route the order through an exchange
- There
is transparency in trade execution and execution price
- There
are no set up costs in screen based trading
CORRECT ANSWER: There is transparency in trade
execution and execution price Explanation: Screen based (Trading thro'
computers) trading is fully transparent. All the derivatives exchanges in India
provide a fully automated screen-based trading platform for index futures,
index options, stock futures and stock options. These trading systems support
an order driven market and simultaneously provide complete transparency of
trading operations. Derivative trading is similar to that of trading of
equities in the cash market segment. All these exchanges have developed
software for the F&O market to facilitate efficient and transparent trading
in futures and options instruments.
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Q 33. Mr. Rohit is a Chartered Accountant and Mr. Ramesh
is a Commerce Graduate. Both are clearing members of a recognized exchange.
Base on this information, identify the TRUE statement.
- Mr.
Rohit will enjoy higher exposure limits than Mr. Ramesh
- Mr.
Ramesh will enjoy higher exposure limits than Mr. Rohit
- Both
of them will enjoy the same exposure limits
- Insufficient
information to draw a conclusion
CORRECT ANSWER: Insufficient information to draw a
conclusion Explanation: Position limits are the maximum exposure levels
which can be assumed by each investor or Clearing Member or the market as a
whole. Such position limits are defined by SEBI. The exchanges lay down
exposure limits either in rupee terms or as percentage of the Trade Guarantee
Fund (TGF)/Settlement Guarantee Fund (SGF). Thus, exposure limits is dependent
on the funds deposited by the Clearing member and not his education
qualifications.
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Q 34. What happens to the intrinsic value of a Put Option
if the Strike Price is taken down?
- The
intrinsic value goes up
- The
intrinsic value goes down
- Their
is no change in the intrinsic value
CORRECT ANSWER: The intrinsic value goes down Explanation:
The intrinsic value of an option refers to the amount by which the option is
In-the-money i.e., the amount an option buyer will realize, before adjusting
for premium paid, if he exercises the option instantly. For a put option which
is in-the-money, the intrinsic value is the excess of Strike price (X) over the
spot price (S). Thus, the intrinsic value of put option can be calculated as
X-S, with a minimum value possible as zero. For eg -- If strike price is 100
and spot price is 90, the intrinsic value is 10 If the strike price is reduced
to 95, the intrinsic value will be 5. Therefore the intrinsic value of put
option goes down as strike price is taken down.
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Q 35. When SEBI has approved the bye-laws of a derivative
exchange, the exchange is free to introduce futures contracts on any number of
stocks and it does not require to go to SEBI every time - State True or False ?
- True
- False
CORRECT ANSWER: True Explanation: Once SEBI
has approved the bye-laws / rules etc. of a derivative exchange, the exchange
is free to introduce futures contracts on any number of stocks in accordance to
the approved rules and it does not have to go to SEBI every time for approval.
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Q 36. If a speculator purchases a naked Call Option, this
means he/she has a _____ .
- Mixed
view
- Bullish
view
- Myopic
view
- Bearish
view
CORRECT ANSWER: Bullish view Explanation: A
naked call option purchase means the speculator is betting that the underlying
asset price will rise.
- Buying
a call option gives the right to buy at the strike price.
- If
the market price goes up, the call option gains value.
- This
reflects a bullish view on the underlying asset.
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Q 37. What does 'Near Month' futures contract mean?
- 'Near
Month' is the current month of the futures contract
- 'Near
Month' is the next month after the current month of the futures contract
- 'Near
Month' is the month of expiry of the futures contract
- None
of the above
CORRECT ANSWER: 'Near Month' is the current month of
the futures contract Explanation: Futures contract have a maximum of
3-month trading cycle -- the near month contract (which is the 1st / Current
month ) the next month contract (which is the 2nd month ) and the far month
contract (which is the 3rd month ). Thus, on May 10th, 20XX, index and stock
futures contracts on the NSE are available for trading for the near month (May
20XX), the next month (June 20XX) and the far month (July 20XX).
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Q 38. 'Rho' is connected to the ______ .
- Volatility
of the underlying
- Time
to expiry of the option
- Price
of the underlying asset
- Interest
rates in the market
CORRECT ANSWER: Interest rates in the market Explanation:
Rho is the change in option price given a one percentage point change in the
risk-free interest rate. Rho measures the change in an option's price per unit
increase in the cost of funding the underlying. Rho = Change in an option
premium / Change in cost of funding the underlying.
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Q 39. In connection with the futures market, basis is
_______ .
- The
current interest rate in the economy
- Volatility
in the market
- The
difference between the futures price and spot price
- Underlying
market price
CORRECT ANSWER: The difference between the futures
price and spot price Explanation: The difference between the spot price
and the futures price is called basis. If the futures price is greater than
spot price, basis for the asset is negative. Similarly, if the spot price is
greater than futures price, basis for the asset is positive.
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Q 40. Identify the transaction which is an example of a
speculative trade using futures.
- When
a person takes a long position in the stock futures in expectations of
announcement of excellent results
- When
a person buys a under priced index futures contract of one month and
simultaneously selling the overpriced index futures contract of another
month
- When
a person buys a stock in the cash market and simultaneously shorts the
overpriced stock futures contract
- When
a person takes a short position in index futures to protect against a
decline in his portfolio value
CORRECT ANSWER: When a person takes a long position
in the stock futures in expectations of announcement of excellent results Explanation:
Speculative transactions in future are those transactions which :
- Do
not result in delivery
- Are
not done for hedging
- Are
not a part of a strategy or arbitrage When a person takes a long position
in the stock futures in expectations of announcement of excellent results
is pure speculative transaction as its not a hedge or a strategy or
arbitrage.
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Q 41. ______ can write an option in the Indian stock
market.
- Market
Makers
- Foreign
portfolio investors
- Individuals
- All
of the above
CORRECT ANSWER: All of the above Explanation:
All of the above can write (sell) options in indian stock market. Individuals
like traders, hedgers, arbitrageurs etc. can write options as per their plans.
FIIs bring foreign capital to India, they invest in the F & O (Future and
option market). FIIs can also write options or short futures, as required by
their strategy. The market maker is a key stock market participant and like any
trader or arbitrageur, he is also there for the profit and buy/write options.
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Q 42. The BID PRICE is always _________ .
- Higher
than ASK PRICE
- Lower
than ASK PRICE
- Equal
to ASK PRICE
CORRECT ANSWER: Lower than ASK PRICE Explanation:
Bid price is the price buyer is willing to pay and ask price is the price
seller is willing to sell. For example the prices as seen on the screen will be
-- Reliance Inds 2500 -- 2501, where 2500 is the bid price and 2501 is the ask
price. So the Bid price is always lower than Ask price.
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Q 43. One of the reason that future trading has become
expensive is due to higher margins - True or False?
- True
- False
CORRECT ANSWER: True Explanation: Cost
components of futures transaction include margins, transaction costs
(commissions), taxes etc. So, higher the margins more expensive the trading.
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Q 44. Who pays the initial margin to the exchange while
entering into a futures contract?
- Only
buyers pay initial margin
- Only
sellers pay the initial margin
- No
margins are payable to the exchange by buyer or seller
- Both
the buyer and seller pay initial margin to the exchange
CORRECT ANSWER: Both the buyer and seller pay initial
margin to the exchange Explanation: The amount one needs to deposit in
the margin account at the time of entering into a futures contract is known as
the initial margin. In case of futures, The buyer and seller are required to
pay initial margin as decided by exchanges for entering into futures contract.
(In case of Options, the initial margin is paid only by the sellers. The option
buyers have to pay the premium)
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Q 45. Which member of a stock exchange is not a Trading
Member itself but clears and settles the trades of Trading Members and
institutional clients?
- A
Trading-cum-clearing member
- A
Professional clearing member
- A
Self-clearing member
- Custodial
participant
CORRECT ANSWER: A Professional clearing member Explanation:
Professional Clearing Member: Professional clearing member clears the trades of
his associate Trading Member and institutional clients. PCM is not a Trading
Member of the exchange. Typically banks or custodians become a PCM and clear
and settle for Trading Members as well as for Custodial Participants.
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Q 46. A loss which is incurred on derivatives
transactions and which are carried out in a recognized stock exchange can be
carried forward for a period of
- 5
assessment years
- 7
assessment years
- 8
assessment years
- 10
assessment years
CORRECT ANSWER: 8 assessment years Explanation:
Loss on derivative transactions can be set off against any other income during
the year (except salary income). In case the same cannot be set off, it can be
carried forward to subsequent assessment year and set off only against any
other non-speculative business income of the subsequent year. Such losses can
be carried forward for a period of 8 assessment years.
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Q 47. The risks connected with trading in derivatives
have to be laid down in which document?
- Contract
Note which is sent to the client
- The
Risk Disclosure document
- It
can be conveyed verbally to the client
- None
of the above
CORRECT ANSWER: The Risk Disclosure document Explanation:
The broker is required to get a Risk Disclosure Document signed by the client,
at the time of client registration. This document informs clients about the
kind of risks that derivatives can involve for the client, it makes the client
aware and informed about the various risks associated with derivatives trading.
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Q 48. The Beta of a portfolio is the ________ .
- Sum
of the betas the constituent securities in that portfolio
- Simple
average of the beta's of the constituent securities in that portfolio
- Same
as the beta of the stock with the highest market capitalization
- Value
weighted average of the beta's of the constituent securities in that
portfolio
CORRECT ANSWER: Value weighted average of the beta's
of the constituent securities in that portfolio Explanation: Portfolio
beta is a weighted average of betas of individual stocks in the portfolio based
on their investment proportion. For example, if there are four stocks in a
portfolio with betas 0.5, 1.1, 1.30 and 0.90 having weights 35%, 15%, 20% and
30% respectively, the beta of this portfolio would be 0.87 ( = 0.50.35 +1.100.15
+1.300.20 +0.900.30)
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Q 49. What is the risk of bad delivery in an index
futures contract?
- The
risk does not exist
- The
risk is very high
- The
risk is there but quiet low
- The
risk is around 25% of the total deliveries
CORRECT ANSWER: The risk does not exist Explanation:
Index futures are financial contracts whose underlying asset is a specific
index like Nifty 50 or Bank Nifty. According to the SEBI regulations, all index
futures contracts are cash-settled i.e. there is no delivery of stocks. As
there is no delivery, risk of bad delivery does not arise. (Bad delivery means
delivery of securities which cannot be legally transferred to the buyer due to
some issue with the securities. For eg. Fake or stolen securities).
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Q 50. When does the monthly series mature for Nifty index
futures of NSE?
- First
Wednesday of the month
- First
Thursday of the month
- Last
Tuesday of the month
- Last
Thursday of the month
CORRECT ANSWER: Last Tuesday of the month Explanation:
As per the revised NSE rules effective from September 2025, the expiry schedule
has changed from Thrusday to Tuesdays. The monthly series of Nifty index
futures now expires on the last Tuesday of the month. If the last Tuesday is a
trading holiday, expiry shifts to the previous trading day.
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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