Numerical on Derivative Market Dealer’s Module

1. Assume that the base value of a market capitalization weighted index were 1000 and the base market capitalization
were Rs.35000 crore. If the current market capitalization is Rs.77,000 crore, the index is at ______________ .

2. Spot value of Nifty is 2140. An investor buys a one month nifty 2157 call option for a premium of Rs.7. The option is _.

3. A call option at a strike of Rs.176 is selling at a premium of Rs.18. At what price will it break even for the buyer of the
option?

4. A stock is currently selling at Rs.70. The call option to buy the stock at Rs.65 costs Rs.9. What is the time value of the
option?

5. A stock currently sells at 120. The put option to sell the stock sells at Rs.134 costs Rs.18. The time value of the option?

6. On 15th Jan. Mr.Arvind Sethi bought a January Nifty futures contract which cost him Rs.240,000. Each Nifty futures
contract is for delivery of 100 Nifties. On 25th January, the index closed at 2460. How much profit/loss did he make?

7. Kantaben sold a January Nifty futures contract for Rs.240,000 on 15th January. Each Nifty futures contract is for
delivery of 100 Nifties. On 25th January, the index closed at 2450. How much profit/loss did she make?

8. Mohan owns a thousand shares of Reliance. Around budget time, he get uncomfortable with the price movements.
Which of the following will give him the hedge he desires?

9. Rajiv is bearish about Company ABC and sells twenty one-month ABC futures contracts at Rs.3.04,000. On the last
Thursday of the month, ABC closes at Rs.134. His payoff position is _______________.

10. Suppose the Company PQR trades at 1000 in the cash market and two month PQR futures trade at 1030. If
transactions costs involved are 0.4%. What is the arbitrage return possible?

11. Anand is bullish about the index. Spot Nifty stands at 2200. He decides to buy one three-month Nifty call option
contract with a strike of 2260 at a premium of Rs 15 per call. Three months later, the index closes at 2295. His payoff
on the position is __________.

12. Chetan is bullish about the index. Spot Nifty stands at 2200. He decides to buy one three month Nifty call option
contract with a strike of 2260 at Rs.60 a call. Three months later the index closes at 2240. His payoff on the position is

13. Satish is bearish about the index. Spot Nifty stands at 2225. He decides to sell one three-month Nifty call option
contract with a strike of 2260 at Rs.20 a call. Three months later the index closes at 2235. His payoff on the position is

14. On 15th January Mr.Kajaria bought a January Nifty futures contract which cost him Rs.240,000. Each Nifty futures
contract is for delivery of 100 Nifties. On 25th January, the index closed at 2360. How much profit/loss did he make?

15. A Trading member Manojbhai took proprietary positions in a November expiry contract. He bought 3000 trading
units at 1210 and sold 2400 at 1220. The end-of-day settlement price for November expiry contract is 1220. If the initial
margin per unit for the November contract is Rs 100 per unit, then the total initial margin payable by Manojbhai would
be ___________.

16. The May futures contract on XYZ Ltd. closed at Rs.3940 yesterday. It closes today at Rs.3898.60. The spot closes at
Rs.3800. Raju has a short position of 3000 in the May futures contract. He sells 2000 units of May expiring put options
on XYZ with a strike price of Rs.3900 for a premium of Rs.110 per unit. What is his net obligation to/from the clearing
corporation today?
17. You are the owner of a 5 million portfolio with a beta 1.0. You would like to insure your portfolio against a fall in the
index of magnitude higher than 10%. Spot Nifty stands at 4000. Put options on the Nifty are available at three strike
prices. Which strike will give you the insurance you want?

18. The beta of TELCO is 0.8. A person has a long TELCO position of Rs. 800,000 coupled with a short Nifty position of Rs.
600,000. Which of the following is TRUE?
(a) He is bearish on Nifty as well as on TELCO
(b) He has a complete hedge against fluctuations of Nifty
(c) He has a partial hedge against fluctuations of Nifty
(d) He is bullish on Nifty as well as on TELCO

19. 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?

20. 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?

21. An index put option at a strike of Rs. 4200 is selling at a premium of Rs. 30. At what index level will it break even for
the buyer of the option?

22. On 1st January, a three month call option on the Nifty with a strike of 4280 is available for trading. The `T’ that is
used in the Black Scholes formula should be _______.

23. The spot price of ABC Ltd. is Rs. 2000 and the cost of financing is 10%. What is the fair price of a one month futures
contract on ABC Ltd.?

24. Cyrus is short 800 WIPRO July Puts at strike Rs. 1520 for a premium of Rs. 43 each on July 22. On July 25, (the
expiration day of the contract), the spot price of WIPRO closes at Rs.1553, while the July futures on WIPRO close at
1655. Does Cyrus have an obligation to the Clearing Corporation on his positions, and how much, if any?
(a) Yes. Rs.19,800 pay-out
(b) No pay in or pay-out on expiration of contract
(c) Yes. Rs.18,900 pay-out
(d) Yes. Rs.19,800 pay-in

25. You are the owner of a 4 million portfolio with a beta 1.0. You would like to insure your portfolio against a fall in the
index of magnitude higher than 12%. Spot Nifty stands at 4200. Put options on the Nifty are available at three strike
prices. Which strike will give you the insurance you want?
(a) 3,870
(b) 3,840
(c) 3,696
(d) None of the above

26. Ratio of Base and Current Free Float Market capitalisation of an index is 1:3.8. If the base value of index is 1000,
calculate the present value of the index.

27. Spot nifty closes @ 7200. Rate of borrowing cost is 8% p.a. RIL announces a dividend of Rs.36/- per share after 20
days from the date of purchase of a two-month Nifty future. RIL’s weightage in Nifty is 10%. Applying ‘Cost of carry’
model, calculate fair value of Nifty two month future. Consider Nifty’s contract size as 100 units. Market price of RIL is
Rs.500.