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. 072SEBI data shows most individual derivatives traders lose money. Should retail access be restricted?Indian derivativesHardsuperdayIndian derivatives desksIndian broking

   Say this

   I would restrict the product design and the leverage rather than the access. The data is stark — SEBI's studies found roughly nine in ten individual traders losing money, with aggregate losses in the tens of thousands of crores — but an outright ban pushes the same demand into dabba trading and offshore apps, where there is no margin, no clearing and no recourse.

   Then walk it

   1. What the data actually says: across SEBI's 2023 and 2024 studies, the large majority of individual F&O traders lost money, losses were concentrated in short-dated index options, and a sizeable share of participants were young and new to markets. The average loss per loss-making trader was several times the median Indian household's annual savings capacity.
   2. The structural causes are identifiable rather than mysterious: weekly expiries create a near-daily lottery, tiny premiums make the minimum bet trivially small, mobile apps gamified the interface, and finfluencer marketing sold option selling as income.
   3. What SEBI has done and what I think is right: fewer weekly expiries, larger contract sizes, upfront margin collection, higher near-expiry margins, mandatory risk disclosures, and action against unregistered advisers. These raise the ticket size and remove the leverage without banning the instrument.
   4. What I would add: a suitability step for first-time derivatives users, a hard cap on intraday leverage for new accounts, and removing the ability to build a position out of many tiny lottery tickets. And I would look hard at broker incentives, since brokerage revenue is proportional to churn.
   5. The counter-argument to take seriously: adults are entitled to take risk with their own money, retail participation adds liquidity that institutional hedgers benefit from, and the same loss statistics are true of day trading equities. Singling out options is partly a choice about which losses we find visible.
   6. Where I land, and I would say it plainly: the case for intervention here is not paternalism about risk, it is that the product design was engineered for frequency rather than for hedging. Fix the design and the leverage, keep the access, and be honest that the market will lose real revenue when you do — which is why exchanges and brokers lobbied against every one of these changes.

   Where candidates lose it

   Taking a side without engaging the counter-argument, or reciting the loss statistics without a policy view. Interviewers on Indian desks ask this to see if you can hold a commercial position and an ethical one at once. Name the displacement risk — dabba trading and offshore apps — because that is the strongest argument against a ban.

   Expect next

   • Would a ban just move the activity offshore?
   • What is the strongest argument against restricting access?
   • Whose revenue falls if you are right?
2. 075How does a foreign investor hedge Indian equity exposure, and why does so much of it happen offshore?Indian derivativesHardsuperdayIndian derivatives desksEquity derivatives

   Say this

   Three routes: onshore index futures and options through an FPI registration, offshore instruments like SGX or GIFT Nifty and participatory notes, and total return swaps with a bank that holds the onshore position. The choice is driven less by pricing than by registration burden, tax treatment and position limits — which is why a large share of the risk transfer historically sat offshore.

   Then walk it

   1. Onshore: register as an FPI, get a custodian, and trade Nifty futures and options directly. You get the tightest pricing and deepest liquidity, and you accept Indian tax, reporting and category-level position limits.
   2. Offshore listed: the Nifty contract that traded on SGX migrated to NSE IX at GIFT City in 2023 as GIFT Nifty. It settles in dollars, trades nearly 21 hours, and lets an offshore investor take Nifty risk without an FPI registration or rupee exposure.
   3. Synthetic: a total return swap or participatory note written by a bank that holds the onshore hedge. The client gets the economics in dollars with no Indian registration. The cost is a financing spread and full counterparty risk to the issuer.
   4. The drivers of the offshore preference are structural: registration takes time, the securities transaction tax and capital gains treatment change the after-tax return, and the currency leg has to be hedged separately in a market with its own constraints. P-notes were largely a regulatory-arbitrage product and SEBI has steadily squeezed them.
   5. GIFT City is the deliberate policy answer — bring the offshore activity onshore into a tax-neutral IFSC with dollar settlement. The migration of the SGX Nifty contract was the flagship success, and rupee derivatives and offshore banking units are the next phase.
   6. The risk to flag, and it is the one that actually catches people: currency and equity are correlated for a foreign investor in India. The rupee weakens when foreign flows leave, which is when equities are falling, so an unhedged currency leg doubles the drawdown. Hedging the equity with GIFT Nifty in dollars looks clean but embeds the rupee move into the contract's value rather than removing it — you have to be explicit about which risk each leg is carrying.

   Where candidates lose it

   Listing the routes without the reason. The interviewer wants the drivers — registration, tax, limits — and the GIFT Nifty migration as the policy response. And the equity-currency correlation for a foreign investor is the analytical point most candidates miss entirely.

   Expect next

   • What happened to the SGX Nifty contract, and why did it matter?
   • Why has SEBI discouraged participatory notes?
   • How correlated are Indian equity drawdowns and rupee depreciation?

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.