0- Spilts are handled by the Options Clearing Corporation (OCC): In case of 1:2 Option becomes half
- Exchange server maintains audit trails in the NSE F&O platform. Audit captures client PAN, UCC, and trade time.
- A typical use-case of algorithmic trading: High-frequency arbitrage
- Algo trading in India is primarily permitted through: Direct Market Access (DMA)
- Minimum latency sought by high-frequency algorithmic traders: 100 microseconds or Less.
- Programming languages used for developing algorithmic trading systems: Python and C++.
- Max pain theory: Strike price where most options expire worthless.
- If rollovers are high with increasing OI and price, it suggests: Long rollover
- The put-call ratio (PCR) of OI is considered a contrarian indicator when: Above 1.5 or below 0.5.
- A sudden rise in ATM call option IV implies: Anticipation of large move.
- When PCR starts to decline sharply in a rising market, it often signals: Bull trap forming.
- In expiry week, which data point gains the highest importance: Rollover %
- Which type of algorithm uses real-time news feeds & NLP to generate trades: Sentiment-based algo
- When a large client places multiple IOC sell orders to suppress price, it is known as ORDER STUFFING
- Limit Order Book (LOB) of F&O is: Anonymous, centralized, electronic.
- In a bull call spread, maximum profit is: Difference in strikes – net premium.
- For a long call strategy, breakeven is: Strike + Premium
- Which Greek is irrelevant for European options close to expiry: RHO
- The most sensitive Greek for short-term ATM options is: GAMMA
- A long combo includes: Long call (lower strike) + long put (higher strike)
- The maximum loss in a straddle sell: Unlimited. Limit orders can sit in book until matched
- The Black-Scholes model assumes: Returns follow a log-normal distribution
- A trader short on futures and long on stock is executing: Arbitrage long basis
- Basis risk in futures arises due to: Non-convergence at expiry.
- A long iron butterfly is most profitable when: Stock is near middle strike at expiry
- Which option strategy can have zero cost entry? Risk reversal
- LOTS: 75 NIFTY, 20 SENSEX, 35 BANKNIFTY, MC Select-140, FINNIFTY-65, BANKEX-30, NXT50-25
- Priority in matching is lost when Order is Modified.
- A trader using a long strangle expects: Sharp movement, but direction unknown
- The main risk for a short straddle is: Large price movement.
- Margin requirements for options writers are: Higher due to unlimited risk.
- The “Greeks” in options are used to: Manage risk.
- A calendar spread profits mainly from THETA Decay. LIMIT Order-Best for Spikes
- On expiry, in-the-money (ITM) options are: Auto-exercised.
- Clearing members need to maintain networth based on: Exposure level.
- A short OTM Put becomes ITM due to a market crash: The margin requirement Increases
- Exchange is responsible for verifying the networth and capital adequacy of trading and clearing members
- EBI guidelines, stock brokers to submit MONTHLY Risk-Based Capital Adequacy Reports.
- The minimum networth required for a clearing member in the derivatives segment is: One Cr
- A Designated Person under insider trading norms includes: Directors, employees, and auditors.
- According to SEBI, the client risk profiling must include: Investment experience, income, and objectives
- A retail investor wants to trade in options. Broker must ensure: Completion of in-person KYC.
- Which type of conflict is most likely if an advisor is paid based on trade volumes: Principal-agent problem.
- As per SEBI, a broker must maintain client records (contract notes) for: 5 years.
- NSCCL acts as a: Central Counterparty (CCP).
- What triggers the collection of extreme loss margin: Market volatility beyond confidence limits.
- A clearing member’s position limits are defined based on: Capital adequacy and risk-based limits.
- The process of netting positions reduces: Gross obligation and settlement risk.
- A custodian (their back office) in the derivatives market primarily helps with: Settlement of trades for INSTITUTIONAL CLIENTS + reporting margining to clearing Crop.
- Client-level position limits in index derivatives are set to: Prevent market manipulation.
- In F&O accounting, the turnover includes: Absolute profits and losses
- Premium paid for buying options is recorded as: Asset till expiry or exercise.
- f an option expires worthless, the buyer must: Write off premium as expense.
- The STT (Securities Transaction Tax) on options sold is calculated on: Premium Value.
- Commodity Derivatives: STT is not applicable — instead, Commodity Transaction Tax (CTT) applies
- In the Indian derivatives market, tax audit is mandatory if: Net profit is less than 6% of turnover.
- TAX audit u/s 44AB will be applicable if turnover exceeds 2 crore and the net profit from such transactions is less than 6% of the turnover.
- Income or loss from F&O trading is calculated under Schedule BP: Computation of income from business or profession.
- In most derivative and intraday trades, STT is only levied on the seller. But in delivery-based equity trades, both buyer and seller pay STT. For exercised options, the buyer pays STT on intrinsic value.
- In case of client default, SEBI guidelines require brokers to: Report to exchange and initiate arbitrations.
- The value of an index is calculated using: Free-float market cap ÷ Base market cap × Base value.
- The tracking error of an index fund indicates: Difference between fund returns and index returns.
- FUTURES: No Upfront cost. Traders only deposit a small percentage (typically 3–12%) of the contract value as collateral — not a cost, but a security deposit.
