Which of the following BEST explains why derivatives are used for hedging?
A trader buys 2 lots of Nifty futures at 24,500. The lot size is 50. At the end of the trading day, the settlement price is 24,420. What is the trader’s mark-to-market (MTM) loss?
The spot price of a stock is ₹1,200. The annual risk-free interest rate is 8%. Assuming a three-month contract, no dividends, and simple cost of carry, what is the theoretical futures price?
A trader sells one lot of futures at ₹1,850. The lot size is 400 shares. At expiry, the settlement price is ₹1,910. What is the trader’s profit or loss?
A trader buys a call option with a strike price of ₹1,000 and pays a premium of ₹45. At expiry, the underlying stock price is ₹1,080. What is the net profit per share, excluding charges?
A trader buys a put option with a strike price of ₹750 and pays a premium of ₹28. At expiry, the stock price falls to ₹690. What is the net profit per share?
A call option has a premium of ₹125. The underlying stock is trading at ₹1,180, and the option’s strike price is ₹1,100. What is the time value of the option?
A trader buys a call option with a strike price of ₹2,000 by paying a premium of ₹75. What is the breakeven price at expiry?
A portfolio is worth ₹50 lakh and has a beta of 1.2. An index futures contract is trading at 25,000, with a lot size of 25. Approximately how many futures contracts are required to hedge the portfolio’s market exposure?
The spot price of a stock is ₹980. Which of the following call options is in-the-money (ITM)?
