Explanation:

As per SEBI circular – Power of Attorney is optional and should not be insisted upon by the stock broker / stock broker depository participant for opening of the client account.

Explanation:

The lot size for JPYINR is 100000 units but its for 100 Yen. Therefore per lot profit or loss has to be multiplied by 1000 (100000/100)

In the above question, the purchase price is 63 and sale price is 63.30. So the profit is .30

0.30 x 30 (lots) x 1000 = Rs. 9000

Explanation:

The last trading day is also known as expiry day or maturity date of contract. It is the day on which trading ceases in the contract. For all monthly currency futures contract expiry date is two working days prior to the last business day of the expiry month at 12:30 PM. On expiry date the trading in contract ceases at 12:30 pm and not on regular trading time of 5:00 pm or 7:30 pm.

Explanation:

Trading Member open proprietary position : 20 – 5 Lots = 15 lots x 1000 (Lot size) = 15,000

Client P : 15 – 3 Lots = 12 lots x 1000 (Lot size) = 12,000

Client Q : 12 -2 Lots = 10 lots x 1000 (Lot size) = 10,000

TM open position is the sum of all open position = 15,000 + 12,000 + 10,000 = 37,000

Explanation:

Over the last three decades, the derivatives market has seen a phenomenal growth. Some of the factors driving the growth of financial derivatives are:

1. Increased volatility in asset prices in financial markets,

2. Increased integration of national financial markets with the international financial markets,

3. A significant growth of derivative instruments has been driven by technological breakthrough. Advances in this area include the development of high-speed processors, network systems and enhanced method of data entry.,

4. Development of more sophisticated risk management tools, providing a wider choice of risk management strategies, and

5. Innovations in the derivatives markets, which optimally combine the risks and returns over a large number of financial assets, leading to higher returns, reduced risk and lower transactions costs as compared to individual financial assets.

Explanation:

The Bid price for EURUSD is 1.07 and the Bid price for USDINR is 81.64

To get the Bid price for EURINR, we multiply 1.07 x 81.64 = 87.35

Explanation:

Since Indian interest rates were higher than US interest rates, the USDINR future rate will also be higher than spot rate.

The difference of rates is 10%, so the one year rates will be higher by appx 10%.

The future price was 85.10. 10% of 85.10 = Rs 8.51 will be the difference for one year future contract

Per month difference will be 8.51 / 12 = 0.709

So 85.10 – 0.709 = 84.39 will be the spot price when the one month futures price is 85.10

Explanation:

Iteration means the action or a process of iterating or repeating.

The binomial option pricing model values options using an iterative approach utilizing multiple periods to value options.

The binomial option pricing model was developed by William Sharpe in 1978. It has proved over time to be the most flexible, intuitive and popular approach to option pricing. The binomial model represents the price evolution of the option’s underlying asset as the binomial tree of all possible prices 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. This is a very accurate model as it is iterative, but also very lengthy and time consuming.

Explanation:

All orders come as active orders into the order book. If they get a match, they will be executed immediately; else they will enter the order book according to their price and time as passive orders. Thus unmatched orders are known as passive orders.

Explanation:

GDP represents the total market value of all final goods and services produced in a country during a given year. A GDP growth rate higher than expected may mean relative strengthening of the currency of that country, assuming everything else remaining the same.

Explanation:

Consumer Price Index (CPI) is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. The indicator measures level of inflation in the economy for the basket of goods and services which are generally brought by the people.

A rising CPI means a rising prices for goods and services and is an early indicator of inflation.

Explanation:

The Income-tax Act does not contain any provision or guidance for computation of turnover in Exchange traded derivatives trading.

The computation of turnover is a very important factor as the applicability of tax audit is determined on the basis of turnover. Also, if the taxpayer is opting for the presumptive taxation scheme under section 44AD (subject to total turnover not exceeding Rs. 2 crores), he can declare the profit at the rate of 6% of such turnover in case of receipts in cheque or any digital modes or 8% of turnover in case of cash receipts.

Explanation:

Clients’ positions are arrived at by summing together net (buy – sell) positions of each individual client. Please note that positions are only netted for each client at contract level and not netted across clients and are rather added up across clients.

A Trading Member’s open position is the sum of proprietary open position, client open long position and client open short position.

Explanation:

With the view to ensure orderly trading and market integrity, SEBI prescribes stock exchanges to implement a mechanism of price bands/ operating ranges so as to prevent acceptance of orders placed beyond the price limits set by the stock exchanges.

For currency option, the price operating range shall be based on the DELTA of the options contract and calculated using the previous close price of the underlying and volatility. The price band so computed shall be subject to a minimum operating range which would be applicable for all contracts.

Explanation:

In the first leg of the spread trade : Sold the three month futures at 81.4 and bought the six month futures at 82.1. Here he has made a loss of 81.4 – 82.1 = – 0.7

To reverse his position – In the second leg of his trade he bought the three months futures at 81.2 and sold the six month futures at 82.2. Here he has made a profit of 82.2 – 81.2 = 1

So overall he has made a profit of -0.7 +1 = 0.3 X 1000 (lot size of USDINR)

= Rs 300 profit

Explanation:

The difference between the interest rates is 3 % ( 7% – 4%)

3 % of 83.10 = 2.493

So the appx. one year future rate for USDINR = 83.10 + 2.493 = 85.59

Explanation:

Option Value = Intrinsic Value + Time Value

Option premium consists of two components : intrinsic value and time value

Intrinsic value refers to the amount by which option is in the money.

Time value is directly proportional to the length of time to expiration date of the option.

Explanation:

India has an interest rate higher than USA, so as per the concept of Interest Rate Parity, the USDINR Future price will always be at a premium to Spot prices. If the interest rate gap widens, so will the spot price-future price gap.

For eg. If the current spot and future price of USDINR is 83 and 84 and if interest rates in India rises, the spot future gap will also widen ie. 82.5 – 84.50 or 83 and 85 etc.

So it will advisable for Mr. Alok to Sell USDINR short term and buy USDINR long term.

Explanation:

When the price was 99.60/99.90, Mr. Mohit sold GBPINR – so he sold at 99.60 as that is the Bid (Buyers) price.

When the price was 98.65 / 98.85, he bought GBPINR, so he bought at 98.85 as that is the Ask (Sellers) price.

Out of the 10 lots bought, he has squared off only 5 lots.

99.60 – 98.85 = 0.75 is the profit

Total Profit = 0.75 x 5 lots x 1000 (each lot of GBPINR)

= 3750

Explanation:

In India, the contract size or lot size is quoted in USD ie. 1000 USD is the lot size and the price is always quoted in INR ie. The exchange rate in Indian Rupees for 1 US Dollar.

Explanation:

There are two common methodologies for pricing options:

– Black and Scholes: This methodology is more analytical, is faster to compute and is mainly used to price European options.

– Binomial pricing: This methodology is more computational, taken more computing power and is mainly used to price American options.

Explanation:

Mr Gopal invested Rs 100000 at GBRINR 1000. So he invested 100000 / 100 = 1000 GBP

His investment rose by 25 % ie.1000 plus 25% = 1250 GBP

He repatriated this amount at GBPINR 105 = 1250 X 105 = 131250

In real terms the growth is from Rs 100000 to Rs 131250 ie. 31.25%

(131250 x 100 / 100000 = 131.25)

Explanation:

Last trading day (or Expiry day) – Two working days prior to the last business day of the expiry month

Final Settlement Day – Last working day (excluding Saturdays) of the expiry month.

Explanation:

All futures contracts are cash settled, i.e. through exchange of cash in Indian Rupees.

The settlement amount for a CM is netted across all their TMs/clients, with respect to their obligations on Mark-to-Market (MTM) settlement.

The Net Position in the above question is 8000 – 6000 = 2000 short

2000 x .7 = 1400

Explanation:

To ensure financial stability and credibility, a company seeking authorization as an exchange for currency futures must have a minimum net worth of Rs 100 crore. This requirement helps to establish confidence among market participants and regulators regarding the exchange’s ability to effectively manage risks and ensure smooth functioning of currency futures trading operations.

Explanation:

When you get your car insured, you pay an insurance premium to the insurance company and the insurance company guarantees to compensate you for the damages to your car during the insurance period.

In this example, you are buying a put option from the insurance company and paying it an option premium in form of insurance premium. If your car gets damaged during the insurance period, you can use your policy to claim the compensation and if all goes well and you do not need to claim the compensation, the insurance company keeps the premium in return for taking on the risk.

Explanation:

This is a simple case of buying and selling a Put Option.

He bought the Put Option at 0.46 and sold the option at 0.27

Loss = 0.27 – 0.46 = – 0.19 x 10000 = – 1900

Explanation:

In this problem, Mr. Bharat, while executing the spread trade will have to make a loss first and than a profit.

In the first leg of trade he will buy at 66.10 (6 month)and sell at 65.50 (3 month) – Thus making a loss of 0.60

In the second leg of trade (after a month) he will square up the above trades by buying at 65.20 (3 month) and selling at 66 (6 month) – Thus making a profit of 0.80

Net Profit = 0.80 – 0.60 = 0.20 x 1000 (lot size) = Rs 200

Explanation:

He has sold USDINR expecting a weakening of prices. But the prices have risen, so he suffers a loss

65 – 65.70 = – 0.70

0.70 x 10 Lots x 1000 (lot size) = – 7000 Loss

Explanation:

The assumption that price discounts everything essentially means the market price of a security at any given point in time accurately reflects all available information, and therefore represents the true fair value of the security. This assumption is based on the idea the market price always reflects the sum total knowledge of all market participants.

Explanation:

SEBI Advertisement and Publicity guideline : A broker should not advertise his business publicly unless permitted by the exchange.

Explanation:

In General –

In a Call Option – The price of option increases with increase in spot price

In a Put Option – The price of option decreases with increase in spot price

Explanation:

When the price was 65.60 / 65.90, the trader sold USDINR – so he sold at 65.60 as that is the Bid (Buyers) price.

When the price was 64.65 / 64.85, the trader bought USDINR, so he bought at 64.85 as that is the Ask (Sellers) price.

Out of the 20 lots bought, he has squared off only 10 lots. The profit has to be calculated only on the squared off trade ie. 10 lots

65.60 – 64.85 = 0.75 ( Profit )

Total Profit = 0.75 x 10 lots x 1000 (each lot of USDINR)

= 7500

Explanation:

Nonfarm payrolls represent the number of jobs added or lost in the economy over the last month

Explanation:

The Committee on Fuller Capital Account Convertibility had recommended that currency futures may be introduced subject to risks being contained through proper trading mechanism, structure of contracts and regulatory environment.

Accordingly, Reserve Bank of India in the Annual Policy Statement for the Year 2007-08 proposed to set up a Working Group on Currency Futures to study the international experience and suggest a suitable framework to operationalize the proposal, in line with the current legal and regulatory framework.

Explanation:

The computational methodology for MTM –

A. For squared off position: The buy price and the sell price for contracts executed during the day and squared off.

B. For positions not squared off: The trade price and the day’s settlement price for contracts executed during the day but not squared up.

C. For brought forward positions: The previous day’s settlement price and the current day’s settlement price for brought forward contracts.

Explanation:

When a person sells a Put option, he has receives the premium and also he has a bullish view.

When volatility decreases there is less movement in option prices. So buying a Call option (bullish view) may not fetch him good returns. But if he sells a PUT option (again bullish view) – this means he will benefit of the bullish move by retaining the entire premium received by him.

Explanation:

For currency futures contract in India, the tick size is 0.25 paise or 0.0025 Rupee

Explanation:

Settlement date is also known as Value date.

Any settlement date after spot value date is called “forward” value dates, which are standardized into 1-month, 2-month, etc after spot value date. The forward market can extend up to one year.

Explanation:

A Broker has to issue contract notes every trading day to his clients as well as clients of his sub brokers.

Explanation:

This is a simple case of buying and selling a Put Option.

He bought the Put Option at 0.49 and sold the option at 0.22

Loss = 0.22 – 0.49 = – 0.27 x 20000 = – 5400

Explanation:

Market orders are orders for which no price is specified at the time the order is entered (i.e. price is market price). For such orders, the trading system determines the price.

For the buy order placed at market price, the system matches it with the readily available sell order in the order book. For the sell order placed at market price, the system matches it with the readily available buy order in the order book.

Explanation:

The investor invested Rs 187500 in US Stock when the USDINR rate was 75

So he had invested 187500 / 75 = 2500 Dollars in US Stocks.

His investment grew by 10% in Dollar terms : 2500 x 10% = 2500 + 250 = 2750

He is repatriating at USDINR rate of 66 : 2750 x 66 = 181500

Therefore his investment in INR terms have gone done from Rs 187500 to Rs 181500

181500 x 100 / 187500 = 96.8

This is a decrease of 100 – 96.8 = 3.2 %

Explanation:

EURUSD moving from 1.18 to 1.30 means EUR becoming stronger against USD. So he will buy EURINR and Sell USDINR.

Explanation:

The arbitrator conducts the arbitration proceeding and passes the award normally within a period of four months from the date of initial hearing.

Explanation:

Buying USDINR – view is USD appreciating against INR

Selling GBPINR – View is GBP depreciating against INR

Combined view – USD appreciating against GBP or GBP depreciating against USD

Explanation:

In modern times, derivatives were first traded in currencies.

Explanation:

The contracts are bought and sold are of different months, so these will be considered as different contracts and not as squared up contracts.

Open Position of Client is : 9 lots bought and 9 lots sold = 18 lots x 1000 (Lot size) = 18000

Open Position of the Trading Member will be his own position plus his clients open position

Trading member : 9 lots bought and 9 lots sold = 18 lots x 1000 (Lot size) = 18000 + 18000 that of his Client = 36000

Explanation:

While entering orders on the trading system, TMs are required to identify the orders, whether proprietary (if own trades) or client (if entered on behalf of clients) through ‘Pro/Cli’ indicator provided in the order entry screen.

Explanation:

Each tick of USDINR is of Rs 0.0025

100 ticks X 0.0025 X 1000 (Contract Size) = 250 Rupees