NISM VIII CHAPTER 4

—-is a contract that gives the right, but not an obligation, to buy or sell the underlying asset on or before a stated date/day, at a stated price, for a price.

Which of the following statement is most accurate regarding rights and obligations under option contract?

Buy a call means:

Buy a put means:

Sell a call means:

Sell a put means:

The buyer of an option has a right in the option contract. For owning this right, he pays a price to the seller of this right called —

Mr F buy an option under which he can exercise his right at any time on or before the expiry date/day of the contract. What type of options referred here?

In India index option are:

Mr Y buy an option but he can exercise his right under option only on the expiry date/day of the contract. What type of options referred here?

—- is the price per share for which the underlying security may be purchased or sold by the option holder.

Mr U buy a call at strike price of $500, paid a premium of $ 10, and the spot price in market of underlying is $570.The call is:

Mr W sell a call at strike price of $650, receive a premium of $ 10, and the spot price in market of underlying is $670.The call is:

Mr F buy a put at strike price of $755, paid a premium of $ 25, and the spot price in market of underlying is $675.The put is:

Mr O sell a put at strike price of $950, received a premium of $ 35, and the spot price in market of underlying is $975.The put is:

Option premium is composed of:

Call option intrinsic value refers to:

For an option, intrinsic value refers to the amount by which option is—

Put option intrinsic value refers to:

If you buy an option what is your maximum possible profit and loss:

If you sell an option what is your maximum possible profit and loss:

Current Price of XYZ Stock is Rs 300. Rs. 255 strike call is quoted at Rs 45. What is the BEP and profit or loss?

Current Price of PQR Stock is Rs 385. Rs. 475 strike PUT is quoted at Rs 40. What is the BEP and profit or loss?

You sold a Put option on a share. The strike price of the put was Rs245 and you received a premium of Rs 49 from the option buyer. Theoretically, what can be the maximum loss on this position?

Current Price of PQR Stock is Rs 400. Rs. 450 strike call is quoted at Rs 20. What is the intrinsic value?

You sold a call option on a share. The strike price of the call was Rs245 and you received a premium of Rs 52 from the option buyer. Theoretically, what can be the maximum profit on this position?

Which of the following is required to pay option margin?

An option buyer pays a relatively small premium for market exposure in relation to the contract value. This is known as—

If all other factors affecting an option’s price remain same, the time value portion of an option’s premium will decrease with the passage of time. This is known as:

High interest rates will result in an — in the value of a call option and a —- in the value of a put option.

Which option pricing model is referred here:The price evolution of the option’s underlying asset, at equally-spaced time steps from today under the assumption that at each step, the price can only move up and down at fixed rates and with respective simulated probabilities.

The Black & Scholes pricing model calculate the price of call using the following key determinants of an option price except:

— is the degree to which an option price will move given a change in the underlying stock or index price

An option with a delta of 0.6 will increase in value approximately by how much, if the underlying share price increases by Rs 5?

Higher the price volatility of the underlying stock of the put option, ______________.

An in-the-money option is _____________.

In which option is the strike price better than the market price (i.e., price difference is advantageous to the option holder) and therefore it is profitable to exercise the option?

Mr. X purchases 100 put option on stock S at Rs 30 per call with strike price of Rs 280. If on exercise date, stock price is Rs 350, ignoring transaction cost, Mr. X will choose _____________.

Three Call series of XYZ stock – January, February and March are quoted. Which will have the lowest Option Premium (same strikes)?

Which is the ratio of change in option premium for the unit change in price of underlying?

If you sell a put option with strike of Rs 245 at a premium of Rs.40, how much is the maximum gain that you may have on expiry of this position?

Which is the ratio of change in delta with respect to change in price of the underlying asset?

Which is the ratio is generally used to gain an idea of how time decay is affecting your option positions.

— is the change of an option premium for a given change (typically 1%) in the underlying volatility.

— is the change in option price given a one percentage point change in the risk-free interest rate.

If a person is bearish on a stock than which of the following activity he can do to gain from his view:

Mr Y short sell 100 stocks of TYI Ltd. Now to hedge himself from loss which may occur from his position he may:

If a person is bullish on a stock than which of the following activity he can do to gain from his view:

Mark-to-market margins are collected ___________.

Out of the money option premium only include time value of option

The intrinsic value of an option can never be negative.

If the spot price of an underlying increases the call option value will:

If the strike price of a put option increases, the value of put option will:

If magnitude of movement in the underlying asset’s price, either up or down is low the option value will: