NISM Certifications · NISM-Series-VIII: Equity Derivatives · Basics of Derivatives
A stock trades at ₹500 in the spot market. The one-month futures on it trades at ₹506. A trader sells the futures and buys the stock at spot, holding until expiry (ignoring costs and dividends). What is the gain locked in at expiry per share?
The locked-in gain is ₹6 per share. The trader buys at ₹500 in spot and sells futures at ₹506; at expiry, futures converge to spot, so the position is effectively sold at ₹506. This cash-and-carry arbitrage profit equals the ₹6 difference.
- A₹6Correct
- B₹0
- C₹12
- D₹506
Explanation
Buy spot at 500 and sell futures at 506. At expiry the futures price converges to spot, so the futures sale and the stock position together deliver 506 for a stock bought at 500. The locked-in gain is 506 - 500 = ₹6. Option ₹12 doubles the basis; ₹0 would apply only if futures equalled spot.
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