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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Accounting and Taxation

A client buys 1 lot (75 units) of Nifty futures at 24,000. On day 1 the settlement price is 24,040. On day 2 it is 23,990. He squares off on day 3 at 24,020. What is the total profit or loss to be booked on the final settlement, and the MTM amount recognised on day 2?

Day 2 MTM is a loss of Rs 3,750, from a 50-point fall times 75 units. Adding day 1 profit of 3,000 and day 3 profit of 2,250 gives a total profit of Rs 1,500, which equals 20 points times 75 units overall.

  1. ADay 2 MTM loss Rs 3,750; total profit Rs 1,500Correct
  2. BDay 2 MTM loss Rs 3,750; total profit Rs 3,000
  3. CDay 2 MTM profit Rs 3,750; total profit Rs 1,500
  4. DDay 2 MTM loss Rs 1,500; total profit Rs 2,250

Explanation

Day 1 MTM: (24,040-24,000)x75 = +3,000. Day 2 MTM: (23,990-24,040)x75 = -3,750. Day 3: (24,020-23,990)x75 = +2,250. Total = 3,000-3,750+2,250 = 1,500, matching (24,020-24,000)x75 = 1,500.

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