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Deep Shikha Malhotra CFPCM M.Com., B.Ed. AMFI Certified for Mutual Funds IRDA Certified for Life Insurance IRDA Certified for General Insurance PG Diploma in Human Resource Management CA. Ravi Malhotra B.Com. FCA DISA (ICA) CERTIFIED FINANCIAL PLANNERCM Vipin Sehgal CFPCM B.Com. NCFM Diploma in Capital Market (Dealers) Module AMFI Certified for Mutual Funds Neeraj Nagpal CFPCM B.Com. AMFI Certified for Mutual Funds IRDA Certified for Life Insurance NCFM Diploma in : Capital Market (Dealers) Module Derivatives Market (Dealers) Module Commodities Market Module Kavita Malhotra B.Com. AMFI Certified for Mutual Funds IRDA Certified for Life Insurance Certification in following Modules of CFPCM Curriculum (FPSB India) Risk Analysis & Insurance Planning Retirement Planning & Employees Benefits Investment Planning Tax Planning & Estate Planning Advanced Financial Planning
Index
Contents Chapter 1 Introduction to Derivatives Chapter 2 Market Index Chapter 3 Introduction to future and Options Chapter 4 Application of Future and Options Chapter 5 Trading Chapter 6 Clearing and Settlement Chapter 7 Regulatory Framework Sample Paper 1 Sample Paper 2 Sample Paper 3 Answer Table Sample Papers Page No. 1-5 6-11 12-18 19-33 34-43 44-57 58-65 66-74 75-83 84-94 95
(a) Index Future (b) Index Options (c) Stock Options (d) Interest Rate Futures D1008 OTC derivative are considered risky because (a) There is no formal margining system (b) They do nmot follow any formal rules or mechanisms (c) They are not setteled on a clearing house (d) All of the above
D 1026 Weekly options traded on NSE follow an _______. (a) European style settlement (b) American style settlement (c) Asian style settlement (d) Weekly Options are not traded at NSE D 1027 Swaption is an option to buy or sell a _______at the expiry of the option (a) swap (b) futures (c) basket option (d) warrant D 1028 _________ is one of the uses of Derivatives? (a) Forecasting (b) Risk taking (c) Arbitrage (d) All of the above D 1029 Which of the following are derivatives? a) Stocks b) Bonds c) Forward Rate Agreements d) All of the above D 1030 Futures and forwards are similar in the following respect____. (a) settlement of contract takes place in the future (b) they have settlement guarantee (c) positions are marked-to-market everyday (d) contracts are custom designed
D 3020 You have bought a stock on the exchange. To eliminate the risk arising out of the stock price, you should _____. (a) buy index futures (b) buy stock futures (c) sell the stock futures (d) none of the above D 3021 An option contract which will not be exercised on the expiry date is ________. (a) an in-the-money option (b) a deep in-the-money (c) an out-of-the-money option (d) None of the above D 3022 Index Funds use index futures to reduce _________ (a) tracking error (b) expenses (c) time to invest in the markets (d) All of the above
Answers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Ch. 3 B B B A A B C C A C C B D A A C B
18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
A A C C A C A A A A B C A B A A B
35 36 37 38 39 40 41 42 43 44 45 46 47
A D A A A A B A C A D C C
D 6008 On 3rd Oct 2007, a trader sold 800 calls on Satyam at a strike price of Rs 550 for a premium of Rs 30/call. On cash market system satyam closed at Rs 590 on that day. If the call option is assigned to him on that day,What is his net obligation on 3rd Oct 2007? a. pay in of 8000 b. payout of 8000 c. payin of 16000 d. Payout of 16000 D 6067 What is the outstanding position on which initial margin will be levied if no proprietary trading is done and the details of client trading are: one client buys 500 units @ 1260. The second client buys 900 units @Rs.1255 and sells 1000 units @Rs.1260? (a) 1900 units (b) 2400 units (c) 500 units (d) 600 units D 6068 Ms. Shetty has sold 1000 calls on ABC Ltd. at a strike price of Rs. 885 for a premium of Rs.27 per call on April 1. The closing price of equity shares of ABC Ltd. is Rs. 890 on that day. If the call option is assigned against her on that day, what is her net obligation on April 01? (a) Pay-out of Rs.22,300 (b) Pay-in of Rs.22,000 (c) Pay-in of Rs.25,000 (d) Pay-out of Rs.22,000 D 6069 What is the outstanding position on which initial margin will be levied if no proprietary trading is d one and the details of client trading are: one client buys 1000 units @ 1260. The second client buys 1000 units @Rs.1255 and sells 1000 units @Rs.1260.? (a) 2000 units (b) 3000 units (c) 1000 units (d) 4000 units D 6070 On 15th January, Raju bought a January Nifty futures contract which cost him Rs.334,500. For this he had to pay an initial margin of Rs.31,520 to his broker. Each Nifty futures contract is for delivery of 100 Nifties. On 25th January, the index closed at 3360. How much profit/loss did he make? (a) (-) 1,200 (b) (-) 1,500 (c) (+) 1,200 (d) (+) 1,500
D 6071 Ms. Shetty has sold 5000 calls on ABC Ltd. at a strike price of Rs. 500 for a premium of Rs.25 per call on April 1. The closing price of equity shares of ABC Ltd. is Rs. 505 on that day. If the call option is assigned against her on that day, what is her net obligation on April 01? (a) Pay-out of Rs.1,22,300 (b) Pay-in of Rs.1,22,000 (c) Pay-in of Rs.1,25,000 (d) Pay-out of Rs.1,00,000
Answers Ch 6 Derivatives 1 B 21 2 D 22 3 B 23 4 A 24 5 A 25 6 C 26 7 B 27 8 A 28 9 D 29 10 C 30 11 C 31 12 B 32 13 A 33 14 B 34 15 C 35 16 A 36 17 C 37 18 B 38 19 B 39 20 A 40
B A D B B D C B C C D C A D C C B A B C
41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
C B D B C A B A A B B A B B D C C D D B
61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76
C B B C D C D D C D D B C D C C
B. UP C. Chicago D. Annual requirements of copper. 8. An 'authorized person' in the Futures & Options segment is ___________. 1 Marks A. any person who is acting in any capacity on behalf of the trading member or a participant for any activity relating to the trades done and executed B. a person authorized by the exchange as an approved user of a trading member C. an approved user of a participant D. All of the above 9. NSCCL's on-line position monitoring _____________on a real time basis. 1 Marks A. clearing member only B. trading member only C. clearing member and trading member D. dealer only system monitors open position of
10. Transaction tax is payable by the __________ of the derivative instrument. 1 Marks A. buyer B. designer C. seller D. originator 49. The futures price is ________.2 Mark A. the price of a contract in the future B. spot price plus cost of carry C. the price at which a futures contract trades in the market D. the price set by the exchange 50. Which of the following is not the duty of the trading member? 3 Marks A. Filling of 'Know Your Client' form B. Assisting the client to arrange for margins C. Bringing risk factors to the knowledge of client D. Execution of Client Broker Agreement 51. The NEAT F&O trading system _____________. 3 Marks A. allows one to enter combination trades B. does not allow combination trades C. allows only a single order placement at a time D. None of the above 52. You have bought a portfolio of securities on the exchange. To eliminate the risk arising out of market, you should _____. 3 Marks
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A. B. C. D.
buy index futures buy stock futures sell stock futures sell index futures
53. Which of the following is the duty of the trading member? A. Sending the periodical statement of accounts to clients B. Maintaining unique client codes C. Ensuring timely pay-in and pay-out of funds D. All of the above
Sample Paper 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
A A A A D B C D C C A D A A D C D B D D C A A B C D A C D B
31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
A C D B D D A D C B D B C B B C B C C B A D D D D A A C B C
Sample Paper 3
9. The market impact cost on a trade of Rs. 4 million of the S&P CNX Nifty works out to be about 0.06%. This means that if S&P CNX Nifty is at 4000, a sell order of that value will go through at a price of Rs. _______. [ 1 Mark ] (a) 3997.60 (b) 3996 (c) 3,999.50 (d) 3,995.50 (e) I am not attempting the question 10. Ms. Shetty has sold 1000 calls on ABC Ltd. at a strike price of Rs. 885 for a premium of Rs.27 per call on April 1. The closing price of equity shares of ABC Ltd. is Rs. 890 on that day. If the call option is assigned against her on that day, what is her net obligation on April 01? [ 2 Marks ] (a) Pay-out of Rs.22,300 (b) Pay-in of Rs.22,000 (c) Pay-in of Rs.25,000 (d) Pay-out of Rs.22,000 (e) I am not attempting the question 11. BANK Nifty is a derivative contract on NSE ____________. True or False? [ 3 Marks ] (a) True (b) False (c) I am not attempting the question 12. CNX IT is a derivatives contract on NSE. True or False? [ 3 Marks ] (a) True (b) False (c) I am not attempting the question 13. Forward contracts on expira tion have to settled by __________. [ 3 Marks ] (a) cash (b) difference in price (c) payment of margin (d) delivery of the asset (e) I am not attempting the question 14. On expiry the settlement price of a stock option contract is the _________.[ 2 Marks ] (a) Closing futures price (b) Closing stock price (c) Closing options price
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(d) None of the above (e) I am not attempting the question 15. In an index fund, trading in the stocks comprising the fund, is required in response to ______. [ 1 Mark ] (a) Favourable company specific news (b) Poor company specific news (c) Mergers (d) Government policies (e) I am not attempting the question 56. Index Funds use index futures to reduce _________ [ 2 Marks ] (a) tracking error (b) expenses (c) time to invest in the markets (d) All of the above (e) I am not attempting the question 57. Weekly options trading commenced on NSE in _______. [ 1 Mark ] (a) 02-Jun-2005 (b) 04-Jul-2005 (c) NSE does not trade in Weekly options (d) 04-Jun-2005 (e) I am not attempting the question 58. The market impact cost on a trade of Rs. 5 million of the S&P CNX Nifty works out to be about 0.05%. This means that if S&P CNX Nifty is at 4200, a buy order of that value will go through at a price of Rs. _______. [ 1 Mark ] (a) 4202.10 (b) 4200 (c) 4210 (d) 4211 (e) I am not attempting the question 59. What is the outstanding position on which initial margin will be levied if no proprietary trading is done and the details of client trading are: one client buys 2000 units @ 1260. The second client buys 2000 units @Rs.1255 and sells 1000 units @Rs.1260.? [ 2 Marks ] (a) 4000 units (b) 5000 units (c) 3000 units (d) None of the above (e) I am not attempting the question
Roots Institute of Financial Markets
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60. In the F&O segment of NSEIL, obligations of client's positions are calculated on a ________ basis. [ 2 Marks ] (a) cumulative (b) gross (c) net (d) portfolio (e) I am not attempting the question
Sample Paper 3
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 D A B D C D C A A D A A D B C A A C C B A A D B D D C C A A 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 C B B B C D B A C A C C B B D B A C C C B B A D D A C A C C
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NISM Modules Practice Books (about 500 Questions per Module) Cost Rs. 600 Per Module
1. MUTUAL FUND DISTRIBUTORS CERTIFICATION EXAMINATION 2. CURRENCY DERIVATIVES CERTIFICATION EXAMINATION
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1. INTRODUCTION TO FINANCIAL PLANNING 2. INVESTMENT PLANNING 3. RISK ANALYSIS OF FINANCIAL PLANNING 4. RETIREMENT PLANNING 5. TAX PLANNING
CFP Certification Modules ---Practice Books (about 800 Questions per Module) Cost Rs. 1000 Per Module
1. INTRODUCTION TO FINANCIAL PLANNING 2. INVESTMENT PLANNING 3. RISK ANALYSIS OF FINANCIAL PLANNING 4. RETIREMENT PLANNING 5. TAX PLANNING
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