Commodities Market. Roll No. Name. INSTRUCTIONS: 1. This Question Paper consists of 2 parts covering 4 sections.

Transcription

1 Commodities Market Maximum Marks: 100 Time Allowed: 3 hours Roll No. Name. INSTRUCTIONS: 1. This Question Paper consists of 2 parts covering 4 sections. 2. Part I consists of objective type multiple choice questions for 70 marks. This part is subdivided into 3 sections. Section 1 consists of 25 questions for 1 mark each. Section 2 consists of 10 questions for 3 marks each. Section 3 consists of 6 questions for 2.5 marks each. All the questions in Part I have four options, of which only one is the correct answer. You are required to write the correct answer with proper reasoning and working, if required. 3. Part II consists of descriptive type questions. Section 4 consists of 6 questions for 5 marks each. You are required to write the answer with proper stepwise explanation and working 4. All the questions are compulsory. 5. You are not allowed to leave your seat during the 1 st hour of the examination for what soever reasons. 6. Sharing of resources is strictly prohibited. 7. Surrender any unauthorized material in your possession which you may have inadvertently brought into the examination room (including your mobile phones) before you start attempting your question paper. All the very best!!!

2 PART I (OBJECTIVE) SECTION = 25 Marks Choose the most appropriate answer from the alternatives given. Each question carries one mark. 1. Meaning of Spread a) Difference in price of two futures contract b) Difference in quantity of two futures contract c) Difference of commodities d) None of these 2. L.M.E. usually refers to a) London Metro Exchange b) London Minerals Exchange c) Lisbon Metal Exchange d) Local metal exchange of India 3. Which was India's first organized futures market a) National commodity and derivatives exchange. b) Bombay Cotton Trade Association Limited. c) Multi commodity exchange. d) Bombay commodity exchange Ltd 4. Market order is a) Executed at the best available price b) Executed at the best available quantity irrespective of price c) Executed at the price given in order entry d) None of these 5. Which is the regulatory body that governs commodities derivatives trading in India? a) SBI b) SEBI c) CBOT d) RBI 6. Calendar Spread Margin is useful for a) Speculator b) Hedging position between contracts c) Not at all useful for anybody d) None of these 7. Long hedge involves a) Purchasing a futures contract only buying b) Purchasing in cash market and selling futures c) Selling futures only d) Selling in cash market and buying future contract Page 2 of 6

3 State whether the statements are true or false. 8. Institutional Trading cum Clearing Member is one form of membership available at MCX. 9. Due date rate is the rate at which the contract is entered into. 10. LME is a derivative exchange in USA. 11. Future price is more than spot price and hence basis is always positive 12. When price of near month future is more than the far month future then market is said to be inverted marked 13. DPR can be revised after hitting first upper or lower DPR 14. The NMCE limited is a national level exchange. 15. The contracts on the Indian stock exchanges are standardized but on Commodity Exchanges are non standardized. 16. Spot and futures markets are perfectly correlated in commodity markets. 17. The clearing house becomes the counter party to each transaction. This is called novation. 18. Gold delivery tendered in case of futures contract must be of standardized quality. 19. The Khusro committee was instituted before the Kabra committee for equity futures. 20. Price Risk management is one of the benefits of forward markets. 21. CBOT was established in the year Theta is the change in option premium from a small change in the asset price (Stock, commodity) Fill in the blanks. 23. paid by the member of exchange is non refundable. 24. contracts are considered risky because they do not follow any formal rules or mechanisms. 25. contracts first emerged as a hedging tool. Section = 30 Marks Choose the most appropriate answer from the alternatives given. Also show the working. Each question carries 3 marks. 26. When the futures price happens to be lower than the fair value of the futures contract, arbitragers profit by a) Selling futures b) Buying the underlying asset c) Selling futures and buying the underlying asset d) Selling the underlying asset and buying futures 27. The quantity units for which prices are quoted for online trading on TWS is known as a) Base value b) basis c) Delivery value d) Tick size Page 3 of 6

4 28. An inter commodity spread is a) price difference between two different commodities with same expiry month b) price difference between spot price and futures price of the same commodity c) price difference between two futures contract of different expiry months of the same bond d) none of the above 29. Price of gold depends upon a) Interest rates b) American economy s growth rate c) Crude oil prices d) Exchange rate of rupee vs dollar e) All of the above f) None of the above 30. A trader sells 3 lots of gold futures at Rs per 10 gms. What is the value of his open short position? Unit of trading is one Kg. a) Rs.37,50,000 b) Rs.37,500 c) Rs.3,75,500 d) None of the above 31. Initial margin is calculated by applying the margin percentage applicable for a contract on the value of the a) Open position b) Closed position c) Squared up position d) Settlement position 32. If the priced for the far month futures contract is lower than the near month futures contract it is a case of a) Normal market b) Contango market c) Backwardation market d) Either b or c 33. As far month futures contract nears expiration, the basis a) Improves b) Reduces c) Remains unchanged d) Reduces to half 34. A put option with a strike price of 127 trades in the market at Rs.12. The spot price is Rs.132. The time value of the option is Rs.. a) 2 b) 5 c) 12 d) 10 Page 4 of 6

5 35. Unit of volume for crude oil at commodity exchange in India is a) Barrel b) Litres c) Cubic meter d) Metric Section = 15 Marks Choose the most appropriate answer from the alternatives given. Also show the working. Each question carries 2.5 marks. 36. A Buys 1 Lot of Mentha oil future at 600 Rs/ Kg, and sold it at 650 / Kg in futures. What is total profit / loss? Lot Size 360 Kgs (2 Drums) and Price Quotation 1 Kg. a) ( ) Rs b) ( ) Rs 1,80000 c) (+) Rs d) (+) Rs 1, Trading unit and base value unit of Chana futures contract is 10 MT respectively. On 25 th January 2008 a trader buys 10 lots of MCX February Chana futures contract at Rs per 100 Kg and wants to limit his entire loss to Rs. 11,000 if the market moves against him. What should be the stop loss order price? a) Rs.1605 per 100 Kg b) Rs.1630 per 100 Kg c) Rs.1610 per 100 Kg d) Rs.1609 per 100 Kg 38. On 15 th Jan 2008, Mr. Bharat buys 4 lots of Feb Gold futures contract at Rs. 12,800 per 10 gm and sells 3 lots of April Gold futures contract at Rs. 13,000 per 10 gm. What amount of margin blocked after considering the spread benefit? (1 contract or lot size is 1 Kg; initial margin is 4%) a) Rs. 2,06,000 b) Rs. 154, 400 c) Rs. 72, 400 d) Rs. 108, Unit of trading for soy bean futures is 10 Quintals, and delivery unit is 100 Quintals. A trader sells futures on 10 units of soy bean at Rs.1500/Quintal. A week later soy bean futures trade at Rs.1450/Quintal. How much profit/loss has he made on his position? a) (+)5000 b) ( )5000 c) (+)50,000 d) ( )50, A trader buys three month call options on 10 units of gold with a strike of Rs.12000/10 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.11080/10 gms. What is his net payoff? a) ( ) 7000 b) (+) 1,000 c) ( ) 700 d) ( ) 1,000 Page 5 of 6

6 41. A trading member has proprietary and client positions in April gold futures contract. On his proprietary account, he sold 30 Kg at Rs per 10 gm. On account of client A, he bought 20 Kg at Rs per 10 gm and sold 15 Kg at Rs per 10 gm, and on account of client B, he sold 20 Kg at Rs per 10 gm. Trading unit of gold is 1 kg. How much is his open position on which he would be margined? a) 2500 units b) 8500 units c) 450 units d) 5500 units e) 5000 units f) None of these PART II (SUBJECTIVE) SECTION 4 Answer any six questions. Each question carries 5 marks. 6 5 = 30 Marks 42. Commodity market is primarily for the hedging purpose. Do you agree? 43. Gold prices have been on the rise for the last few months. Explain the major factor for such a phenomenon. 44. Commodities market is less risky than equity markets. Analyse the statement 45. What does open interest in the market implies. 46. What do you mean by cost of carry? Briefly explain various arbitrage strategies available to the trader when there are differences in spot plus cost of carry and future prices. 47. What is spread? Differentiate between buying and selling spread with example. 48. What is Cash & carry and reverse cash and carry arbitrage? 49. What is Margin? Types of margin levied from time to time on different commodities? 50. Hedging and arbitrage are similar kinds of market positions though the intent differs. 51. International players are taking up huge investment positions in Indian commodity market. Explain. * * * * * Page 6 of 6