Futures & Options Flashcards
How many series the Future has?
this month, next month and far month
How future Rollover is done?
Current price is 1960 for certain stock future, which becomes 1940 over period of time and expiry happen. Then next month the price will be near 1940, where the trader starts, either below or above. This is called Rollover.
2 Types of Futures?
Index future
Stock Future
What is “Free Float” in stock market?
Free Float = Market Capital - Promotor’s holdings for that stock
What are the mostly traded indexes in stock market?
NIFTY50
NIFTY BANK & NIFTY IT
If the price of NIFTY FUTURE is more that NIFTY INDEX, then
It is said that the FUTURE is at PREMIUM
If the price of NIFTY FUTURE is LESS than the NIFTY INDEX (NIFTY 50), then…
It is said that the FUTURE is at DISCOUNT.
Generally, which is more than other…
NIFTY FUTURE or NIFTY 50
Generally, price of NIFTY FUTURE is more than NIFTY 50.
NIFTY FUTURE _________NIFTY 50
FOLLOWS
What is the different between price of NIFTY FUTURE and NIFTY 50 at expiry?
They are same…so the different is Zero.
Why margin is to be paid for future purchase?
Because trader never purchase the future at its actual cost. So, there is cost of carry associated with purchase.
Generally, how much % of total cost of future is to be paid as margin?
8%
BANK NIFTY consists of how many bank stocks and how is the division?
12 bank stocks
9 - Private Sector bank
3 - Public Sector bank (SBI, PNB and BOB)
Which is more volatile…NIFTY BANK or NIFTY 50
NIFTY BANK
How many series are present in weekly expiry for BANK NIFTY?
8 Series run in parallel
Futures expiry is _____ but Options Expiry is ______-
Futures - monthly
Options - monthly as well as weekly
between BANK NIFTY & NIFTY 50, whose margin is more?
BANK NIFTY - As it is more volatile than NIFTY 50.
BANK NIFTY Lot size is…..
40
For Stock Futures, at what price they are traded in market?
At Cash Market Price.
Following is True or False
The stock which are eligible for future are always part of NIFTY 50.
FALSE, they may or may not be a part of NIFTY 50.
What are the 2 basic F&O criteria for any stock, to be eligible?
Market Capital & Volume Traded.
What is Market Wide Position Limit Criterion for any stock to be eligible for F&O?
Minimum open position for the stock at Closing month is 500 Cr and Max. is 20% of the Free Float of that stock
What is Quarter Sigma Value for stock?
Price should not change with Trade amount.
What is the minimum quarter sigma value for stock to be part of F&O list?
Minimum is 25 Lacs.
Minimum delivery value for any stock to be part of F&O list?
10 Crores
What is the locking period for stock?
Stock which cannot be sold once purchased for some period of time.
Why is stock banned?
When the stock fails to be part of F&O eligibility criterion, which was earlier part of F&O, then it is banned.
True or False
When the stock is banned, trader can take new position in that stock.
False
True or False
Existing position will be continued if the stock is banned?
True
If the stock is banned, can it be sold?
Yes, that’s how the traders reduce their position in stock.
Can the stock be traded in intraday, if it is banned?
Yes
When the penalty is applicable for stock.
When the stock is traded for more that 20% of its free float. And such stock will be banned from F&O.
Can the trade value for banned stock cross 20% of its free float in intraday?
Yes, but it is for intraday.
What is the action the trader take post the stock in banned in F&O?
Traders book loss or profit and reduce position in that stock.
How much penalty imposed on trader, if trader tries to take new position in stock, which is in F&O ban?
1% of purchase cost of that stock. (Increase in position)
When is the decision of ban taken by Exchange for any stock?
At End of the day, but not during trading hours.
What are the 3 parameters, which decide a particular stock is uptrend?
Stock price - increase
Trade Volume - increase
OI on buy side - increase
What are the 3 parameters which decide the stock is in downtrend?
Stock price - decrease
Sell Volume - increase
OI on sell side - increase
True or False
When stock comes out of ban, generally, it follows its earlier trend (Uptrend/ downtrend) which was before ban.
True
When the stock must be out of ban?
When the Open Interest (OI) is 80% or less of the stocks MWPL (Market wide position limit)
True or False
Exchange Monitor the stocks and identifies the one which often goes into ban.
True.
What action is taken by exchange for stocks which are often banned?
Exchange increase margin amount for such stocks, for preventing the traders from heavy trading of such stock.
The stocks which are heavily traded are ______
more volatile than other stocks.
What combination of trading derivatives decide the ban?
Futures and Options
True or False
The of particular stock is applicable for current series but may not be applicable for next series of same stock.
True, because the Open interest might not have crossed 95% of the total OI (Future + Option) for that series.
F&O is _____
Derivative
True or False
In F&O, there is no actual stock purchase happen.
True
True or False
Buy means Long
Sell means Short
True
What is the advantage of Derivative?
Trader can buy in lesser cost then actual price of the stock
What is short Covering?
First sell a stock and then buy it.
What is long unwinding?
First buy it and then sell it.
Market runs on ________ of the people who trade.
Sentiments
What is the full form of SENSEX?
SENSITIVE INDEX
What is Stop-Loss?
Exit the current position, with loss depending on risk appetite of trader, for given stock.
What is generally Stop -loss value?
Generally, 1% or 2% below the purchase price of stock. But depends on risk appetite of trader.
