NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Derivatives
A stock trades at Rs 500 and one-month futures are quoted at Rs 506. The lot is 1,000 shares. A trader buys one lot of futures, and at expiry the stock closes at Rs 515, which is also the final futures settlement price. What is the trader's profit, ignoring costs?
The profit is Rs 9,000. The trader bought futures at Rs 506 and the contract settled at Rs 515, a gain of Rs 9 per share. Multiplied by the lot size of 1,000 shares, this gives Rs 9,000. The spot price of Rs 500 is not the entry price.
- ARs 9,000Correct
- BRs 15,000
- CRs 6,000
- DRs 3,000
Explanation
The futures profit is the settlement price minus the buy price, times lot size: (515 - 506) x 1,000 = Rs 9,000. Rs 15,000 wrongly uses the spot price of Rs 500 as the base, and Rs 6,000 is the basis (futures minus spot) times lot size.
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