securities contract regulation act 1956 is the regulatory framework under which the trading of derivatives contracts is govern

Any OTC contract, but mainly a forward contract, is a non-standardised customised derivative contract that all the buyers and
price, quantity and quality, date of delivery pertaining to the underlying assets.

Arbitrage means the buying and selling of shares, commodities, or any other asset class in different markets at the same time

vega of an option means the change in the price of the option with respect to the percentage change in the implied volatility of

theta measures the underlying asset's price decay as time passes.

Delta is an option greek which measures the rate of change of options price with respect to the changes in price of the underlyi

The daily settlement price also known as the closing price in stock futures is arrived at by calculating the weighted average of

The theoretical forward pricing used in derivatives market is also known as forward rate/base price.

The initial margin requirement is based on the worst-case loss of portfolio at client level to cover 99% value at risk over one d

The acronym SPAN margin stands for Standard Portfolio Analysis Of Risk. It is a system for calculating margin requiremen

Tick size is the minimum permitted price movement in a futures contract.

Rho is an option greek which measures the changes in the value of a portfolio of options with respect to changes in the interes

The daily settlement of positional trade in derivative contract to reflect the daily profit and loss scenario is called mark to ma

Black Scholes is the methodology used for the pricing of options in India.
In the case of BSE Index futures, the monthly series matures on last Thursday of the month.

The theta value of an option suggests the effect of ‘time-to-expiry’ on options price. The theta jargon is also referred to as tim

The extrinsic value of an option contract is the difference between market price (premium) and intrinsic price.

An investor / trader who is bearish on the market can consider buying a put option or selling a call option.

In stock futures, the position limit is set, as a risk management tool, to avoid erroneous price quoting by investors and traders.

In put option when the strike price is lower than the current market price, the option is said to be trading as out of the money c

In an option when the strike price is equal to the current price, in the case of both call and put, the option is said to be at the m

In an Over-the-Counter contract there are no formal centralised limits on individual positions, leverage or margining. TRUE

The options delta is a constant which remains unaffected by the changes in the implied volatility (IV) of an option. FALSE. D

The term implied volatility refers to a metric that captures the market's view of the likelihood of changes in a given security's

In India, stock derivative contracts presently allow participants to settle their positions in delivery of the underlying stock. TR

Exotic options are always non-standardised derivative contracts having complex underlying attributes. NOT ALWAYS TRUE

A vanilla option is a call option or put option that has no special or unusual features.

The mark-to-market adjustment of span margin reflects the notional profit and loss situation arising out of closing price move
In an option contract, the exercise price, also known as the strike price, is the same as the options price/premium. FALSE

In an American option, the option buyer has full obligation to exercise his rights any time before the expiry of the contract. FA

In India, the index options are European in nature in terms of buyer’s right to exercise while the stock options are always Ame
options are european options only in India.

The option delta value is always a constant and does not change in response to the changes in the option volume build up and i

Vega of an option is solely dependent on the implied volatility in the option’s volume and price levels. TRUE

An ATM call or put option will only have extrinsic value and no intrinsic value. TRUE (they do have time value (extrinsic v

Higher the volatility of the stock, lower the premium the call option can fetch. FALSE. Higher the voltality, higher the opti

The time decay effect on near month option contract is always profoundly higher than on the far month option contract for the

The time value and the intrinsic value of an option together comprise the option premium TRUE

Commodities derivative cannot be an underlying asset for a financial derivatives FALSE. Can be.

In-the-money options will see greater change in its value (price) than At-the-money or Out-of-the-Money for a unit change in t

The delta value of put option is always negative and always ranges between 0 and -1. TRUE

In the calculation of commodity asset forward pricing, the term ‘U’ is generally added to the spot price. The cost ‘U’ usually in

Which of the following can be the underlying for a commodity derivative contract? Anything that has monetary value.
Daily mark to market settlement is done everyday.

Options trading in commodity take place in Indian commodity exchanges. BSE/NSE/MCX/NCDEX

Commodity exchanges enable producers and consumer to hedge their price risk given the uncertainty of the future.

Expiry date is the last day on which the futures contract will be traded, at the end of which it will cease to exist.

Forward contracts are bilateral contracts and hence exposed to counter party risk. TRUE

The net open position is considered for exposure and daily margin purposes.

Whenever the futures price moves away from the fair value, there would be opportunity for arbitrage. TRUE

Commodity derivatives can both be cash settled and physically settled TRUE

Commodity derivatives have certain uniqueness as compared to its peer in the exchange traded class of assets. They typically i

A short Hedge is appropriate when the hedger already owns the asset, or is likely to own the asset and expects to sell it at som

Essential commodities such as rice and tur dal are on the banned list in Indian commodities market. TRUE.

The major difference between an OTC forward contract and exchange traded derivatove contract is that there is counter party r

Contracts is agro-based commodities are usually introduced depending on seasonal conditions unlike the sequential form follo

tender period in commodity derivatives ensures that day and speculative traders are kept out for physical settlement commodi
If the last trading day as specified in the respective commodity contract is a holiday then the last trading day is taken to be the

Any person seking to dematerialize a commodity has to open an account with an approved depository participant, like a bro

Rematerliazation refers to issue of physical delivery against the credit in the remat account of the constituent

The acronym NCDEX stands for National Commodities and Derivatives Exchange.

On the introduction of new contracts, the base theoretical price is the weighter average price of the unerlying commodity in t

Due Date Rate is the delivery rate which depends on the spot rate of the underlying adjusted for the discount / premium for q
A long hedge is appropriate when a company knows it will have to buy a certain asset in the future and wants to lock in the pr

A short hedge can also be used when the asset is not owned at the moment but is likely to be owned in the future. TRUE

pre expiry margin is usually charged to ensure that only interested parties remain in the market and speculators roll over their

Pre-expiry margins is usually charged in commodity market to ensure that only interested parties remain in the market and spe

Futures contracts are attractive for market participants as compared to OTC contracts because futures contracts have transpar

Purchasing a futures contracts means the buyer must hold on to the contract till expiry and cannot close ot the contracft with an

By heding, the losses made in the underlying market is offset by the profits made in the futures market. TRUE

All futures contract have an initial margin and SPAN margin requirements.
The change in the price of an option contract for a percentage change in the implied volatility of an option is called Vega

The change in an option delta for a change in the value of the underlying is called Gamma

Margins are based on the rules and regulation a prescribed by the SEBI from time to time
Tick size refers to the minimum price difference at which traders can enter bids and offers.

The price of an option and degree of variance in the option price largely depends on the volatility and the number of days for t

The extrinsic value of that same contract reduces as time goes by even if the underlying asset remains completely stagnant. Th
The time decay effect will be largely for an ATM option contract with lesser days to expire. TRUE (as it only has extrinsic v

premium is the price paid on top of the strike price which is lost in case the buyer or the seller wishes to withdraw from his ob

There are no daily price bands (circuit limits) applicable for Currency Futures contracts. FALSE. Available.
The higher the implied volatility, the more the stock is expected to move and hence greater possibility that the underlying asse

The higher the implied volatility of the underlying asset, the higher the extrinsic value of its options will be and more expensi
favour.

Deep in-the-money options contract will have higher delta value and the value diminishes as the intrinsic value of the option d
only because they are significantly above or below the market price of the underlying asset)

If an option trader is bullish on the market he can either buy a call option or sell a put option. TRUE

If an option trader is bearish on the market he can either buy a put option or sell a call option. TRUE
Seller of an option is always limited in terms of profits to the extent of premium received if his conviction comes true. TRUE

If the market is less volatile and is in a limited range then the option trader is better of writing the option contract. TRUE

In option contract, the buyer always has unlimited profiting possibility and the seller limited profiting possibility. TRUE

In futures contract, the span margin charged by the exchanges changes on a daily basis to reflect the current risk scenario in the

A trader bought 10 Jan SENSEX contracts at the BSE. How will the trader close out this position in the market ? By selling 10

SPAN is risk and volatility based margining system

Derivative contracts traded on the exchange have the following qualities- transparency, standardization, liquidity, lesser co

Price steps is the minimum difference between two quotes of similar nature.
Volume of trade is the number of contracts traded on a given day

Position wise limits are the maximum open positions that a member or his constituents can have in any underlying at any poin

The closing price, often referred to as Daily Settlement Price, is NOT the Last Trade Price. TRUE- it is the volume weighted

Derivative includes a contract to buy or sell at a future date with a pre-decided price, quantity and date. It is used as a p
the calue of it's underlying asset, which can be anything- bonds, equity, currency, commodity and index.

Indices serve as the measurement of value/benchmark for futures and options products and also for the Exchange Traded Fu

Derivatives are highly leveraged, which implies that a small move in the price of the underlying asset can lead to a large g
Tick size is the minimum amount by which the price of a security can change.

An option series consist of a group of option contracts of the same underlying asset, with the same strike price and expir

Higher the volatility of the stock, lower the premium the call option would fetch. FALSE. Higher the volatility, higher the p

OTM contracts with less days to expire will not see much of time decay effects as the premium value is at the lowest levels. F

The extrinsic value of that same contract reduces as time goes by even if the underlying asset remains completely stagnant. Th

Theta value is highest for ATM options and progressively lower for ITM and OTM options as both these options have much lo

The lower the IV, the more volatile the stock is expected to be and hence the lower the possibility that the stock will move in y

The higher the IV, the more the underlying is expected to move and hence a greater possibility that the underlying asset will m

ATM contracts are more responsive than ITM and OTM contracts to any change in the implied volatility TRUE

OTM contains nothing more than extrinsic value, their prices are 100 percent determined by the option vega FALSE (ATM)

The implied of the underlying stock determines the Extrinsic Value, which is governed by Options Vega. TRUE
The total number of outstanding contracts (long/short) at any point in time is called net open position.

A company that wants to sell an asset at a particular time in the future can hedge by taking short futures position. TRUE

The net open position is considered for exposure and daily margin purposes.
Whenever the futures price moves away from the fair value, there would be opportunity for arbitrage. TRUE

A Spread order is an order to buy or sell a stated amount of a commodity at a specified price, or at a better price, if obtainable

Settlement involves payment and delivery for all the transactions done by the members.

Tick size refers to the minimum price difference at which traders can enter bids and offers.

In futures contract, the span margin charged by the exchanges changes on a daily basis to reflect the current risk scenario in the

Derivative contracts traded on the exchange have the following qualities- transparency, standardization, liquidity, lesser co

Price Steps is the minimum difference between two quotes of similar nature.
Volume of trade is the number of contracts traded on a given day

Position wise limits are the maximum open positions that a member or his constituents can have in any underlying at any poin

The closing price, often referred to as Daily Settlement Price, is NOT the Last Trade Price. TRUE- it is the volume weighted

Derivative includes a contract to buy or sell at a future date with a pre-decided price, quantity and date. It is used as a p
the value of it's underlying asset, which can be anything.

Derivatives are highly leveraged, which implies that a small move in the price of the underlying asset can lead to a large g

The derivatives market helps to transfer risks from those who have them but may not like them to those who have an appetite

In an OTC market, the management of counter-party (credit) risk is decentralised and located within individual institutions. tr
Commodity market and trading in India is regulated by SEBI

MCX is the first commodity exchange in India to provide near real time spot prices of commodities traded on the Exchange.

A limit order order is an order, placed with the broker, to buy or sell a particular futures contract at the market price if and wh

An order to buy or sell a stated amount of a commodity at a specified price, or at a better price, if obtainable at the time of exe

The permitted trading lot size for the futures contracts and delivery lot size on individual commodities is stipulated by the Exc

Implied volatility of an option is an estimate and not an observation. TRUE

Put call ratio is arrived at by dividing the total amount of put options traded by the total amount of call options traded.

An ATM option premium will carry little or no intrinsic value but will carry extrinsic value. TRUE

An OTM option premium has no intrinsic value and very low extrinsic value TRUE

Option price with the help of binomial option pricing method is measured in three variables: the amount of potential loss, t

If no trade happens in the last 30 minutes before close, the exchange initiates the theoretical forward price (cash + cost of carry