Tuesday, December 20, 2011

Commodity Market Quiz - 2

1. A trader has purchased crude oil futures at Rs.750 per barrel. He wishes to limit his loss to 50%. He does so by placing a stop order to sell an offsetting contract if the price falls to or below __________.

2. Gold trades at Rs.6000 per 10 gms in the spot market. Three-month gold futures trade at Rs.6150. One unit of trading is 100 gms and the delivery unit for the gold futures contract on the NCDEX is 1 kg. A speculator who expects gold prices to fall in the near future sells 10 units of gold futures. Two months later gold futures trade at Rs.5900 per 10 gms. He makes a profit/loss of ______________________.

3. A trader sells three-month call options on 10 units of gold with a strike of Rs.7000 per 10 gms at a premium of Rs.70. Unit of trading is 100 gms. On the day of expiration, the spot price of gold is Rs.6980/10 gms. What is his net payoff?
[A](-) 1,000
[B](+) 1,000
[C](+) 700
[D](+) 7000

4. Which of the following futures don't trade on the NCDEX?
[A]Six month futures
[B]One month futures
[C]Three month futures
[D]Two month futures

5. The exchange levies initial margin on derivatives contracts using the concept of ______________.

6. The margin is charged so as to cover __________ loss that can be encountered on the position on 99% of the days.
[A]One day loss
[B]One week loss
[C]One month loss
[D]One trading period loss

7. The selling constituent will be responsible for the following:
[A]Payment of entry tax, octroi, etc., when the commodities are brought into the designated local area for lodging the same with the warehouse.
[B]Obtaining registration under the relevant state sales tax laws, filing of returns, payment of taxes and due compliance of laws.
[C]Complying with any check-post regulations prescribed under the local sales tax, entry tax or other municipal laws and ensuring that the prescribed documents accompany the goods.
[D]All of the above

8. Which of the following is not a national level multicommodity exchange?
[A]Ahmedabad commodity exchange
[B]National Board of Trade
[C]National Commodity & Derivatives Exchange of India Ltd
[D]Multi Commodity Exchange of India

9. A cotton trader bought ten one-month, long staple cotton futures contracts at Rs.6020 per Quintal at the beginning of the day. The unit of trading is 11 bales and each contract is for delivery of 55 bales. The settlement price at the end of the day was Rs.6050 per Quintal. The trader's MTM account will show (11 bales = 18.7 Quintal)

10. ___________ give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date.
[C]Call options
[D]Put options

11. Which of the following is an investment asset?

12. An call option with a strike price of 150 trades in the market at Rs.12. The spot price is Rs.160. The time value of the option is Rs._________.

13. Due to the ________ nature of the underlying assets, physical settlement in commodity derivatives creates the need for warehousing.

14. Who identifies the buyer to whom the delivery notice is assigned?
[A]The clearing corporation
[B]The buyer
[C]The exchange
[D]The warehouse

15. Physical settlement in a commodity futures market involves the physical delivery of ___________.
[A]the futures contract
[B]the profits
[C]the underlying commodity
[D]None of the above