NISM Certifications · NISM-Series-VIII: Equity Derivatives · Sales Practices and Investors Protection Services
A client sold 1 lot (250 units) of an index future at 22,000. The previous day's settlement price was 22,040 and today's settlement price is 21,980. What is the client's MTM for today?
The client makes an MTM profit of Rs 15,000. For a short position carried from the previous day, MTM equals previous settlement minus today's settlement, which is 60 points. Multiplying by the lot size of 250 gives Rs 15,000 profit.
- ALoss of Rs 15,000
- BProfit of Rs 15,000Correct
- CProfit of Rs 10,000
- DLoss of Rs 10,000
Explanation
The position was carried from the previous day, so MTM uses the previous settlement price. Short position gains when price falls: 22,040 - 21,980 = 60 points x 250 = Rs 15,000 profit. Using the trade price of 22,000 gives Rs 5,000, so that is a wrong base.
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