Master Futures & Option Key Benefit of Learning Derivative trading

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NISM Equity Derivatives

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1 / 48

Q1. What is a derivative?

A. A fixed income security

B. A mutual fund product

C. A financial instrument whose value is derived from an underlying asset

D. A loan instrument

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Q2. Which of the following is not an example of a derivative?

A. Futures

B. Options

C. Bonds

D. Forwards

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Q3. In a futures contract, the buyer has:

A. The right but not the obligation to buy

B. No obligations at all

C. An obligation to buy the underlying asset at maturity

D. An obligation to sell the asset

4 / 48

Q4. A call option gives the buyer the:

A. Right to sell the underlying asset

B. Obligation to sell at strike price

C. Right to buy the underlying asset at the strike price

D. Obligation to buy on expiry

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Q5. Which of the following is a hedging strategy in derivatives?

A. Naked call writing

B. Buying put options to protect portfolio

C. Speculative futures trading

D. Taking arbitrage positions

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Q6. What is the lot size in the equity derivatives market?

A. The minimum number of shares in one derivative contract

B. The maximum number of shares allowed in cash market

C. The number of shares you can trade in intraday

D. Price per share

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Q7. The expiry of stock futures contracts happens on:

A. Last Friday of every month

B. 15th of each month

C. Last Thursday of the contract month

D. First Monday of the month

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Q8. What is ‘mark-to-market’ (MTM) in futures trading?

A. Profit or loss settled at the end of the month

B. Closing the contract automatically

C. Daily profit or loss settlement based on closing price

D. Premium paid on options

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Q9. Who decides the margin requirement in equity derivatives?

A. SEBI

B. Stockbroker

C. Clearing Corporation / Exchange

D. RBI

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Q10. What is intrinsic value of an option?

A. The option premium paid

B. The strike price of the option

C. The difference between spot price and strike price (if in-the-money)

D. Brokerage on options

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Q.11 Derivative instruments derive their value from?

A. Company profits

B. Underlying asset

C. Dividend declared

D. NAV of a fund

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Q.12 Which of the following is not a derivative?

A. Futures

B. Options

C. Mutual funds

D. Forwards

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Q.13. The first exchange to launch derivatives trading in India was?

A. BSE

B. NSE

C. MCX

D. NCDEX

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Q.14 Futures contract is?

A. Standardized

B. Customized

C. Private agreement

D. ) Unregulated

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Q.15 Forward contract is?

A. Standardized

B. OTC customized

C. Exchange traded

D. Always liquid

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Q.16 Which of the following is an underlying for derivatives?

A. Shares

B. Gold

C. Indices

D. All of the above

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Q.17 The buyer of a call option has?

A. Right to sell

B. Right to buy

C. Obligation to buy

D. Obligation to sell

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Q.19 Option premium is?

A. Price paid by option buyer

B. Price received by option buyer

C. Margin charged

D. Brokerage fee

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Q.20 Intrinsic value of a call option is?

A. Spot price – Strike price

B. Strike – Spot

C. Premium

D. Zero always

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Q.21 If spot = ₹120, strike = ₹100 (call option), intrinsic value is?

A. ₹0

B. ₹20

C. ₹10

D. ₹220

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Q. 22 Put option intrinsic value is?

A. Strike – Spot (if positive)

B. Spot – Strike

C. Always zero

D. Premium paid

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Q.23 European option can be exercised?

A. Anytime

B. Only at expiry

C. Before expiry

D. Never

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Q.24 . American option can be exercised?

A. Only at expiry

B. Anytime before or on expiry

C. Only before expiry

D. Never

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Q.25 Index derivatives are settled in?

A. Physical delivery

B. Cash

C. Gold

D. Shares

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Q.26 Which is not a benefit of derivatives?

A. Hedging

B. Speculation

C. Arbitrage

D. Guaranteed returns

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Q.27 Lot size in futures and options is decided by?

A. SEBI

B. Stock Exchange

C. RBI

D. AMC

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Q.28 Mark-to-Market settlement in futures is done?

A. Weekly

B. Daily

C. Monthly

D. Yearly

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Q.29 Margins in derivatives are collected to?

A. Increase profits

B. Reduce risk

C. Avoid brokerage

D. Enhance liquidity

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Q.30 SPAN margin is?

A. Initial margin

B. Exposure margin

C. Maintenance margin

D. None

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Q.32 Speculators use derivatives to?

A. Transfer risk

B. Take risk for profit

C. Avoid market

D. Invest long term

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Q. 33 Arbitrage in derivatives means?

A. Speculation

B. Riskless profit

C. Gambling

D. Hedging

32 / 48

Q.34 The clearing corporation acts as?

A. Buyer to every seller and seller to every buyer ✅

B. Broker

C. Investor

D. Custodian

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Q.35 Futures price depends on?

A. Spot price

B. Cost of carry

C. Dividend

D. Both a and b

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Q.36 Open interest means?

A. Number of contracts outstanding

B. Trading volume

C. Premium

D. Profit

35 / 48

Q.37 . Implied volatility is derived from?

A. Option premium

B. Spot price

C. Strike price

D. NAV

36 / 48

Q.38 Time value of an option is?

A. Premium – Intrinsic value

B. Premium + Intrinsic value

C. Always zero

D. Spot – Strike

37 / 48

Q.39 If call option premium is 12, intrinsic value is 10, time value is?

A. 2

B. 22

C. 10

D. 12

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Q.40 Delta of a call option is?

A. Negative

B. Between 0 and 1

C. Always 1

D. Cannot be measured

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Q.41 . Put option delta lies between?

A. -1 and 0

B. 0 and 1

C. -2 and 0

D. 1 and 2

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Q.42 Gamma measures?

A. Rate of change of delta

B. Time decay

C. Volatility

D. Interest rate risk

41 / 48

Q.44 Theta measures?

A. Time decay of option premium

B. Volatility

C. Delta change

D. Interest risk

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Q.44 Vega measures sensitivity to?

A. Volatility

B. Interest

C. Dividend

D. Margin

43 / 48

Q.45 Rho measures sensitivity to?

A. Interest rates

B. Spot

C. Volatility

D. Strike

44 / 48

Q.46 Which index futures are traded in India?

A. Nifty

B. Sensex

C. Bank Nifty

D. All of the above

45 / 48

Q.47 SEBI regulates derivatives trading under?

A. SCRA Act

B. RBI Act

C. Companies Act

D. FEMA

46 / 48

Q.48 If spot = 100, futures = 105, cost of carry =?

A. Positive

B. Negative

C. Zero

D. Not known

47 / 48

Q.49 . If futures price < spot price, it is?

A. Contango

B. Backwardation

C. Arbitrage

D. Premium

48 / 48

Q.50 In-the-money option means?

A. Has intrinsic value

B. Has zero value

C. Only time value

D. Cannot be exercised

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