Equity Derivatives Certification Free Demo Test 10

Explanation:

The Nifty, the Bank Nifty futures contracts and the stock futures contracts listed on the NSE expire on the last Thursday of the respective month (or the day before if the last Thursday is a trading holiday).

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).

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 ( = 0.5*0.35 +1.10*0.15 +1.30*0.20 +0.90*0.30)

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.

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.

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.

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.

Explanation:

Cost components of futures transaction include margins, transaction costs (commissions), taxes etc.

So, higher the margins more expensive the trading.

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 iinitial 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)

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.