NISM Certifications · NISM-Series-VIII: Equity Derivatives · Accounting and Taxation
A trader buys 1 lot of a stock future (lot size 500) at ₹200 and the exchange settles it daily. The daily settlement prices are ₹204 on day 1 and ₹199 on day 2. What is the cumulative MTM amount credited or debited to the trader's account at the end of day 2?
The cumulative MTM is a debit of ₹500. The long position gains ₹4 x 500 = ₹2,000 on day 1 and loses ₹5 x 500 = ₹2,500 on day 2, so the net is a loss of ₹500, equal to (199 - 200) x 500.
- ADebit of ₹500Correct
- BCredit of ₹2,000
- CCredit of ₹500
- DDebit of ₹2,500
Explanation
Day 1 MTM = (204 - 200) x 500 = +₹2,000 credit. Day 2 MTM = (199 - 204) x 500 = -₹2,500 debit. Net = 2,000 - 2,500 = -₹500, a debit. Check: (199 - 200) x 500 = -₹500. Using only day 2's loss gives the wrong ₹2,500.
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