NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Clearing and Settlement System
A trader buys 1 lot (lot size 100 units) of a stock future at Rs 500. The daily settlement price on day 1 is Rs 495 and on day 2 is Rs 508. Which is the MTM cash flow on day 2 for the trader?
The trader receives Rs 1,300 on day 2. MTM on a continuing position is computed against the previous day's settlement price: 508 minus 495 is Rs 13, multiplied by 100 units. The Rs 800 figure is cumulative profit, not the day 2 flow.
- AReceipt of Rs 1,300Correct
- BPayment of Rs 1,300
- CReceipt of Rs 800
- DReceipt of Rs 500
Explanation
On day 2 the MTM is measured against the previous settlement price: (508 - 495) x 100 = Rs 1,300 received. Using Rs 500 as the base gives Rs 800, which is the cumulative profit but not the day 2 cash flow. Check: day 1 loss of Rs 500 plus day 2 gain of Rs 1,300 equals Rs 800 cumulative.
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