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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Trading Mechanism

A trader buys 2 lots of a stock future at Rs 500 with a lot size of 1,000. The initial margin is 12% of contract value. The daily settlement price on day 1 is Rs 495. What is the initial margin blocked and the day-1 MTM position?

Contract value is 2 lots x 1,000 x Rs 500 = Rs 10,00,000, so 12% margin is Rs 1,20,000. The long position loses Rs 5 on 2,000 units as price falls to Rs 495, so the mark-to-market loss is Rs 10,000.

  1. AMargin Rs 1,20,000; MTM loss Rs 10,000Correct
  2. BMargin Rs 1,20,000; MTM loss Rs 5,000
  3. CMargin Rs 60,000; MTM loss Rs 10,000
  4. DMargin Rs 1,20,000; MTM profit Rs 10,000

Explanation

Contract value = 2 x 1,000 x 500 = Rs 10,00,000, so margin at 12% = Rs 1,20,000. Price fell by Rs 5 on 2,000 units, giving a loss of Rs 10,000. Rs 5,000 uses only one lot, and Rs 60,000 uses one lot for margin.

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