Equity Derivatives Certification Free Demo Test 9

Explanation:

In futures contract, the profits / losses are received / paid as and when the contract is closed (squared up) by the trader or on maturity, which ever is earlier.

Explanation:

The three calendar spreads can be between months 1 and 2, 2 and 3 and 1 and 3.

Explanation:

Futures, Forwards, Options, Swaps etc. are all products in the derivative market.

Preference share is not a derivative product.

Explanation:

Although Futures and Options were introduced as hedgeing tools but there is no pre-condition that one has to own the stock to trade in futures and options.

One can easily buy and sell options without owning the underlying stock.

Explanation:

Over the Counter options are made as per the needs of the trading parties – so they are customised.

Future options are standardised as per the rules of stock exchange.

Explanation:

Calendar spreads carry only basis risk and no market risk – hence lower margins are adequate.

That is why margin on calendar spread transaction in index futures is lower than the sum of regular margin on two independent legs of spread transaction.

(Basis risk arises when the price of a futures contract does not have a predictable relationship with the spot price, which is very rare.

Market risk is the risk that the price of a stock etc. will increase or decrease due to changes in market factors)

Explanation:

A closing transaction is one that reduces or eliminates an existing position by an appropriate offsetting purchase or sale. This is also known as “squaring off” your position.

A client is said to be closed a position if he sells a contract which he had bought before or he buys a contract which he had sold earlier.

Explanation:

Index futures are always cash settled.

Individual securities can be cash settled or by delivery.

Explanation:

Complaints against trading members on account of the following can be taken by an Exchange for redressal :
– Non-receipt of funds / securities
– Non- receipt of documents such as member client agreement, contract notes, settlement of accounts, order trade log etc.
– Non-Receipt of Funds / Securities kept as margin
– Trades executed without adequate margins
– Delay /non – receipt of funds
– Squaring up of positions without consent
– Unauthorized transaction in the account
– Excess Brokerage charged by Trading Member
– Unauthorized transfer of funds from commodities account to other accounts etc.

Explanation:

The buyer / holder of a Put option is of the view that price of the underlying will fall.

He thus acquires a short position on exercise.