Derivatives Foundation interview preparation

Questions

100

Traced to a firm

29

Firms

19

Updated

September 2026

Asked at

All firmsMSMorgan Stanley4Nomura4Akuna Capital2Amundi2HSBC2PIMCO2Bank of America1Barclays1Citadel1DRW1Goldman Sachs1Jane Street1Millennium Management1Mizuho1Old Mission Capital1RCRBC Capital Markets1Scotiabank1UBS1Wells Fargo Securities1

Topic

All topicsForwards and futures10Options basics8Option pricing7The Greeks10Volatility7Option strategies9Swaps and rates7Credit derivatives4Market structure and clearing6Indian derivatives8Trading and markets9Brainteasers6Fit9

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseMarket viewBrainteaserFit

1. 070Explain the weekly expiry ecosystem in Indian index options and what it does to pricing.Indian derivativesIntermediatetechnicalIndian derivatives desksIndian broking

   Say this

   Weekly expiries created a market where most of the volume is in options with one to four days of life, which means enormous gamma and theta and almost no vega. Pricing on expiry day stops looking like Black-Scholes and starts looking like a supply and demand auction on a few strikes around spot, with implied volatility on the wings that no model would produce.

   Then walk it

   1. The mechanics: exchanges staggered weekly expiries across indices so that at one point there was an expiry nearly every day of the week, which concentrated retail activity into a daily cycle rather than a monthly one. SEBI cut this back to one weekly expiry per exchange in late 2024.
   2. What short dating does to the Greeks: a one-day at-the-money option has enormous gamma and theta and essentially no vega. So the trade is a pure gamma-versus-theta contest, and the volatility surface becomes almost meaningless as a level.
   3. The observable distortion: far out-of-the-money weekly options trade at implied volatilities of 60, 80, sometimes over 100 percent, not because anyone forecasts that volatility but because the option costs 2 rupees and there is a floor on the tick. Lottery demand sets the price of the wings.
   4. On expiry day the flow dominates. Large short-gamma positions must hedge in the direction of the move, so you get sharp intraday trends into the close, and then a pin towards the strike with the biggest open interest. That is dealer hedging mechanics, not information.
   5. The settlement convention interacts with it: because settlement is a VWAP of the last half hour, hedging demand is concentrated in that window, which is where you see the volume spike and the sharpest moves.
   6. The commercial honesty: this ecosystem exists because it generates extraordinary exchange and broker revenue and because retail demand for lottery payoffs is real. SEBI's own analysis found the large majority of individual derivative traders lose money, and the reforms since 2024 — fewer expiries, larger lots, higher margins near expiry — are a direct response. Anyone interviewing on an Indian desk should be able to say both that the ecosystem is a genuine liquidity pool and that its retail side is a wealth transfer.

   Where candidates lose it

   Describing weekly expiries as just a shorter-dated option. The interviewer wants the consequences: gamma and theta dominate, vega vanishes, wing implied volatilities become meaningless, and expiry-day price action is dealer hedging rather than information. And be able to state the retail loss data without editorialising.

   Expect next

   • Why do far out-of-the-money weeklies show implied volatilities over 80 percent?
   • What causes the sharp moves in the last half hour of expiry day?
   • What did SEBI change in 2024 and why?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.