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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Clearing and Settlement System

A trader buys 1 lot (lot size 100) of a futures contract at Rs 2,000. Day 1 settlement is Rs 2,030, day 2 settlement is Rs 2,010, and the trader sells at Rs 2,050 on day 3, when settlement is Rs 2,060. What is the cumulative profit across all three days, and what is the day 3 MTM cash flow?

The cumulative profit is Rs 5,000 and the day 3 MTM is Rs 4,000. Daily MTMs of 3,000, -2,000 and 4,000 sum to 5,000, matching the direct gain of Rs 50 per unit on 100 units; the closing price, not settlement, is used on the exit day.

  1. ATotal Rs 5,000; day 3 MTM Rs 4,000Correct
  2. BTotal Rs 5,000; day 3 MTM Rs 5,000
  3. CTotal Rs 6,000; day 3 MTM Rs 4,000
  4. DTotal Rs 4,000; day 3 MTM Rs 4,000

Explanation

Day 1: (2,030-2,000)x100 = 3,000. Day 2: (2,010-2,030)x100 = -2,000. Day 3: closed at 2,050 against 2,010, so 40x100 = 4,000. Total = 3,000 - 2,000 + 4,000 = 5,000, which also equals (2,050-2,000)x100. The day 3 settlement price of 2,060 is irrelevant as the position is closed.

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