NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Understanding Derivatives
Consider this caselet. Ms. Anita Sharma, a 45-year-old investor, holds Nifty-linked stocks worth Rs 30 lakh with a beta of 1.0 against Nifty. Nifty futures trade at 20,000 with a lot size of 50. She wants to fully hedge her portfolio using Nifty futures. How many lots should she sell?
She should sell 3 lots, since one Nifty lot is worth Rs 10 lakh and the portfolio is Rs 30 lakh with beta 1.
- A30 lots
- B15 lotsCorrect
- C60 lots
- D50 lots
Explanation
Value of one lot = 20,000 x 50 = Rs 10,00,000. Hedge requires portfolio value x beta divided by lot value = 30,00,000 x 1 / 10,00,000 = 3 lots. So 3 lots are required, which is not listed; recheck options: none equal 3, so the intended computation must use different data.
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