Practice Test

Q1) 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? Show Answer

Q2) Mr. X purchases 100 put options 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_________ Show Answer

Q3) Ms. Shetty has sold 1400 calls on HLL at a strike price of Rs. 2.97 for a premium of Rs. 11 per call on April 1. The closing price of equity shares of HLL is Rs.300 on that day. If the call option is assigned against her on that day, what is her net obligation on April 1? Show Answer

Q4) Ms. Shetty has sold 1400 calls on HLL at a strike of rs.297 for a premium of Rs.11 per call on April 1.The closing price of equity shares of HLL is Rs.303 on that day. If the call option is assigned against her on that day, what is her obligation on April 01? Show Answer

Q5) 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 _____________. Show Answer

Q6) Three Call series of XYZ stock - January, February and March are quoted. Which will have the lowest Option Premium (same strikes)? Show Answer

Q7) A short position in a CALL option can be closed out by taking a long position in a PUT option with same exercise date and exercise price. Show Answer

Q8) You sold a put option on a share. The strike price of the put was Rs.245 & you received a premium of Rs.49 from the option buyer. Theoretically, what can be the maximum loss on this position? Show Answer

Q9) The strategy in which a trader buys a call option of lower strike price & sells another call option with a higher strike price of the same share & same expiry date is called _____. Show Answer

Q10) Short straddle is created by shorting a call & a put option of same strike & same expiry. Show Answer

Q11) Ms. Rita sold a put option of strike price Rs. 90 & she received a premium of Rs. 6 from the option buyer. Theoretically, what can be the maximum loss on this trade? Show Answer

Q12) You have bought a CALL option of SBI of strike price of Rs. 1000 of January. To close the position, you will buy a PUT of same strike price of January. Show Answer

Q13) _________ spread involves same strike, same type but different expiry options. Show Answer

Q14) Which of the below option will lead to – Limited Profits but potentially unlimited losses? Show Answer

Q15) Vertical spread is also known as calendar spread. Show Answer

Q16) Which of these CALL options are Out of The Money (OTM)? Show Answer

Q17) The number of breakeven points in a short straddle is/are __________. Show Answer

Q18) The intrinsic value of a put option is the maximum of ___________. Show Answer

Q19) There is a put option on a stock with a strike price of Rs. 35 trading at Rs. 2. What would be the price of the put option with a strike price of Rs. 34? Show Answer

Q20) Compared to a long strangle the chances of loss in Long straddle are- Show Answer

Q21) Given that at strike price = Rs. 50 Put Premium = Rs. 5, Call Premium = Rs. 2. If an investor is using a Long Straddle
Strategy, then his initial outflow would be-
Show Answer

Q22) Mr. XYZ sells a Nifty Put option with a strike price of Rs. 4000 at a premium of Rs. 21.45 and buys a further OTM Nifty Put option with a strike price Rs. 3800 at a premium of Rs. 3.00 when the current Nifty is at 4191.10, with both options expiring on 31st July. If on expiry the Nifty closes at 3600, what is the net pay-off for Mr. XYZ? Show Answer

Q23) Mr. A buys a call with strike price of Rs.100 for Rs. 3 and sells a call with strike price of Rs. 90 for the same month for Rs. 6. The maximum possible loss in the strategy is ___________. Show Answer

Q24) A stock ABC Ltd. is trading at Rs. 450. Mr. XYZ is bullish on the stock. He sells a Put option with a strike price Rs. 400 at a premium of Rs. 1.00 and buys a Call Option with a strike price of Rs. 500 at a premium of Rs. 2. If the stock closes at Rs. 600, his net payoff is _________. Show Answer

Q25) Bull call spreads can be implemented by buying an _______________ option, while simultaneously writing a higher strike _______________ option of the same underlying security and the same expiration month. Show Answer

Q26) Nifty is presently at 2694. Mr. XYZ buys one Nifty ITM Put with a strike price Rs. 2800 at a premium of Rs. 132 and sells one Nifty OTM Put with strike price Rs. 2600 at a premium Rs. 52. If on expiry of the options the Nifty closes at 2200, then the net pay-off for Mr. XYZ is ___. Show Answer

Q27) The seller of a call option does not expect: Show Answer

Q28) A Long Straddle is a _________ strategy. Show Answer

Q29) A Short Strangle is a slight modification to the ____________. Show Answer

Q30) What is the reason for investors to opt for a long strangle strategy instead of a long straddle strategy? Show Answer

Q31) Suppose ABC Ltd. is trading at Rs. 4457 in June. An investor Mr. A buys a Rs. 4500 call for Rs. 100 while shorting the stock at Rs. 4457. If ABC Ltd. closes at Rs. 4100 on expiry of the options contract, the net payoff for the investor is Rs. ________. Show Answer

Q32) Which of the following options strategy is not a bullish strategy? Show Answer

Q33) Mr. A buys a call with strike price of Rs. 99 for Rs. 6 and sells a call with strike price of Rs. 105 for the same month for Rs. 3. If at expiry, stock closes at 105, what is the profit/loss for the strategy? Show Answer

Q34) Suppose a June call option on a stock X is currently trading at Rs. 31 with a strike price Rs. 35. On the expiration date the price of the stock is Rs. 32. Then, which of the following is correct? Show Answer

Q35) Which of the following is not a type of spread? Show Answer

Q36) __________ is created when the underlying view on the market is positive but the trader is also like Show Answer

Q37) Horizontal spread is also known as __________spread Show Answer

Q38) Buying calls at a strike of 5100& calls at a strike of 5300 is an example of _______ spread. Show Answer

Q39) An option contract which will not be exercised on the expiry date is ______ Show Answer

Q40) A Bull spread can be created only by _______. Show Answer

Q41) . Long straddle is a strategy with _______. Show Answer

Q42) A spread that is designed to profit if the price goes down is called ________ spread. Show Answer

Q43) When you buy a PUT option on a stock you own, this strategy is called _______. Show Answer

Q44) A trader buys a call & a put option of same strike price & same expiry. This is called as _______. Show Answer

Q45) Three Call series of XYZ stock-January, February and March are quoted. Which will have the lowest option premium (same strikes)? Show Answer

Q46) If an investor buys a call option with lower strike price and sells another call option with higher strike price, both on the same underlying share and same expiration date, the strategy is called _________ Show Answer

Q47) The option contract payoff is Show Answer

Q48) Mr. A buys a call option with lower strike price & sells another call option with higher strike price both on the same underlying share & same expiration date, the strategy is called ______. Show Answer

Q49) Mr. Ranjan sold a ABC stock put contract of Rs.300 strike price at Rs.28. what will be his profit/loss if he buys it back at Rs.13. the lot size is 1000 shares. Show Answer

Q50) Long straddle is a strategy of _______ Show Answer

Q51) A butterfly spread is an extension of ______ strategy. Show Answer

Q52) The strangle strategy is similar to straddle strategy in outlook but different in ________. Show Answer

Q53) An investor Mr. B sells 2 ATM Call Options, Buys 1 ITM call option and buys 1 OTM call option. The strategy is a __________ strategy. Show Answer

Q54) The lower breakeven point in a long straddle ______________. Show Answer

Q55) Suppose ABC Ltd. is trading at Rs. 4368 in June. An investor buys a Rs. 4200 call for Rs. 98 while shorting ABC Ltd. The breakeven point is __________. Show Answer

Q56) Mr. XYZ is bullish on Nifty when it is at 4191.10. He sells a Put option with a strike price Rs. 4100 at a premium of Rs. 170.50 expiring on 31st July. If Nifty closes at 3400 at expiry Mr. XYZ's profit / loss will be _______. Show Answer

Q57) A ___________ is created by going short on both put and call options, and the strike price and time to expiration of both the options are same. Show Answer

Q58) The net effect of this strategy is to bring down the cost and raise the breakeven on buying a Put (Long Put). Show Answer

Q59) In a Bull Call Spread if the stock price rises to the higher (sold) strike, the investor makes the _________. Show Answer

Q60) Mr. X buys a put with strike price of Rs. 114 for Rs. 7 and sells a put with strike price of Rs. 110 for the same month for Rs. 5. If at expiry, stock closes at 100, what is profit/loss for the strategy? Show Answer

Q61) Suppose ABC Ltd. is trading at Rs. 4500 in June. An investor, Mr. A, shorts Rs. 4300 Put by selling a July Put for Rs. 24 while shorting an ABC Ltd. stock at Rs. 4500. If ABC Ltd. closes at Rs. 4400 on expiry of the options, the net payoff for Mr. A is ___________. Show Answer

Q62) Covered Call payoff diagram has same shape as payoff diagram of a ___________. Show Answer

Q63) Suppose an investor Mr. A buys ABC Ltd. for Rs. 4758. He writes a Call of strike price Rs. 5000 for Rs. 39 while simultaneously purchasing a Rs. 4700 strike price Put for Rs. 27. At expiry of the options the stock closes at Rs. 5100. The Net payoff for Mr. A is __________. Show Answer

Q64) Suppose Nifty is at 4351 in May. An investor executes a long strangle by buying a June Rs. 4300 put for Rs. 123 and a June Rs. 5850 call for Rs. 85. The net debit taken to enter the trade is __________. Show Answer

Q65) The profit in a collar strategy is __________. Show Answer

Q66) Which strategy involves writing a call and put option at different strike price but same maturity __________. Show Answer

Q67) Mr. X buys a put with strike price of Rs. 100 for Rs. 5 and sells a put with strike price of Rs. 108 for the same month for Rs. 10. The maximum possible gain in the strategy is ___________. Show Answer

Q68) In case of Bull Put Spread Maximum Profit is achieved when _________. Show Answer

Q69) Mr. D Buys a Stock Buys a Put and Sells a Call on the stock. This strategy is ___________. Show Answer

Q70) Mr. Ramesh is adopting a Bear Call spread strategy using call options on a stock having the strike prices of Rs. 150 and Rs.125, priced at Rs. 7 and Rs. 20 respectively. At what price of the stock during the expiration, would he break even? Show Answer

Q71) Which of the following statements about a covered call writing strategy is true? Show Answer

Q72) In case of straddle there are _________ breakeven points. Show Answer

Q73) In case of strangle there are _________ breakeven point Show Answer

Q74) A person owns a portfolio of Rs. 5 Lakhs which has a beta of 1. The current NIFTY is 5000. He would like to protect his portfolio against a fall of more than 10%. Put options are available at 4 strike prices. Which strike price will give the required protection? Show Answer

Q75) A protective put payoff is similar to that of ________. Show Answer

Q76) Mr. Banerjee sells a Put option of a higher strike price & buys a put option of lower strike price, both on the same share & same expiration. This strategy is called ________. Show Answer

Q77) A trader sells a lower strike price CALL option & buys a higher strike price CALL option, both of the same scrip & same expiry date. This strategy is called ______. Show Answer

Q78) A ________ is created by shorting a call & put option of same strike & same expiry. Show Answer

Q79) In BID-ASK price, the bid price is the price at which the trader is willing to ______. Show Answer

Q80) Cyrus is short 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 July futures on WIPRO close at 1655.Does Cyrus have an obligation to the Clearing Corporation on his positions ,and how much, if any ? Show Answer

Q81) When ordinary cash dividends are declared, put option value will decrease. Show Answer

Q82) Mr. Prashant has bought 1 lot of ABC futures for Rs.75 (lot size 2000) expecting that this share will go up. But he also wants to protect himself against any loss of more than Rs. 3000. What should he do? Show Answer

Q83) Nifty is currently 4900. An investor feels Nifty will not rise beyond 5000 in the next 3 months. He sells 2 Nifty calls of strike price 4900 at Rs.100 per share. Because of positive indicators, Nifty rises to 4950 on expiry day. What is his profit/loss? (1lot = 50 shares) Show Answer

Q84) The current stock price of XYZ Ltd. is Rs. 30. At an exercise price of Rs. 30, put option on XYZ is priced at Rs. 2.15 each and the call options are priced at Rs. 2.89 each. Each contract consists of 100 options. What is the maximum profit if you buy a call? Show Answer

Q85) Nifty is at 3200. Mr. XYZ sells 2 ATM Nifty Call Options with a strike price of Rs. 3200 at a premium of Rs. 98 each, buys 1 ITM Nifty Call Option with a strike price of Rs. 3100 at a premium of Rs. 141.55 and buys 1 OTM Nifty Call Option with a strike price of Rs. 3300 at a premium of Rs. 64. The Net debit is ___________. Show Answer

Q86) The profit in a covered call strategy is _________. Show Answer

Q87) Mr. XYZ sells a Nifty ITM call option with strike price of Rs. 2600 at a premium of Rs. 154 and buys a Nifty OTM call option with strike price Rs. 2800 at a premium of Rs. 49. If on expiry the Nifty closes at 3200, the net pay-off for Mr. XYZ is __________? Show Answer

Q88) Nifty is at 3200. Mr. XYZ buys 2 ATM Nifty Call Options with a strike price of Rs. 3200 at a premium of Rs. 97.90 each, sells 1 ITM Nifty Call Option with a strike price of Rs. 3100 at a premium of Rs. 141.55 and sells 1 OTM Nifty Call Option with a strike price of Rs. 3300 at a premium of Rs. 64. On expiry of the options Nifty closes at 3600. The net payoff for Mr. XYZ is __________. Show Answer

Q89) Nifty is at 3600. Mr. XYZ sells 1 ITM Nifty Call Option with a strike price of Rs. 3400 at a premium of Rs. 41.25, buys 1 ITM Nifty Call Option with a strike price of Rs. 3500 at a premium of Rs. 26, buys 1 OTM Nifty Call Option with a strike price of Rs. 3700 at a premium of Rs. 9.80 and sells 1 OTM Nifty Call Option with a strike price of Rs. 3800 at a premium of Rs. 6.00. On expiry of the options if Nifty closes at 3100, the net pay-off for Mr. XYZ is ___________. Show Answer

Q90) An investor adopts a short straddle at a strike price of Rs. 49, premium for call being Rs. 2.30 and put being Rs. 3.50. the maximum gain would be: Show Answer

Q91) Nifty is at 3600. Mr. XYZ buys 1 ITM Nifty Call Option with a strike price of Rs. 3400 at a premium of Rs. 41.25, sells 1 ITM Nifty Call Option with a strike price of Rs. 3500 at a premium of Rs. 26, sells 1 OTM Nifty Call Option with a strike price of Rs. 3700 at a premium of Rs. 9.80 and buys 1 OTM Nifty Call Option with a strike price of Rs. 3800 at a premium of Rs. 6.00. On expiry of the options if Nifty closes at 3200, the net pay-off for Mr. XYZ is __________. Show Answer

Q92) In the straddle strategy, both options have same strike price but in strangle strategy, the strike price are different & are mostly out of the money option. Show Answer

Q93) What is a covered call? Show Answer

Q94) If a trader buys a put option with a higher strike price & sells a put option with a lower strike price both of the same underlying then this strategy is called ______. Show Answer