Basics of Derivatives

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1 point

Option 1

Clear selection

A trader is likely to prefer an options contract to a futures contract on an asset if: *

1 point

He is uncertain but thinks it more likely that the price of the asset will fall than rise

He thinks the price of the asset will certainly rise

He thinks the price of the asset in the underlying market will certainly fall

He is uncertain but thinks it more likely that the price of the asset will rise than fall

He thinks the price of the asset will remain unchanged

Which of following cannot be called as Derivative Instrument *

1 point

Futures

Fixed Deposit

Options

Swaps

Required

Hedgers who are short in an asset can establish the maximum price they will have to pay for that asset by: *

1 point

Buying a put option on the asset

Writing a call option on the asset

Buying a call option on the asset

Writing a put option on the asset

Either the first or fourth answer

Either the second or third answer

1 point

Option 1

Clear selection

If Reliance Capital is trading at Rs. 560 in cash market (Spot). Theoretically what should be the price of Reliance capital futures expiring 60 days from today. Risk free rate is 7% p.a. *

1 point

566.26

566.16

566.30

566.20

The time value of an option is greater the longer the period the option has to run.

1 point

True

False

Other:

Clear selection

An option whose intrinsic value is calculated by comparing the strike price with the average spot price over the period of the option is: *

1 point

A European option

An Asian option

A barrier option

Other:

If You have taken a short position in one contract on the June NIFTY futures at a price of 10200 and lot size is 75 what price should buy back to gain profit of 15000 *

1 point

10400

10000

15000

9500

Required

Green line in the below graph denotes ".............. "relationship between spot price and expected futures price *

1 point

contango

Backwardation

Futures premium

Assuming You Buy Reliance 840 strike rate Call Option at premium of Rs 15 and sell Reliance 880 strike rate call option at premium 7 Rs and Reliance expires at 890 what would be Your gain or loss on 1 lot Reliance ( Lot size of Reliance is 1000 units) *

1 point

Profit 32000

Profit 35000

profit 38000

loss of 32000

Other:

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