Skip to content

NISM Certifications · NISM-Series-VIII: Equity Derivatives · Basics of Derivatives

A trader buys 2 lots of a stock futures contract, lot size 500, at ₹200. The day's settlement price is ₹195. Next day the settlement price is ₹202, and the trader squares off the position at ₹204 during that day. Ignoring charges, what is the total net profit/loss over the two days on the position?

The net result is a profit of ₹4,000. The position covers 1,000 shares. Day one MTM is a loss of ₹5,000 and day two adds a gain of ₹9,000 from 195 to 204. This equals the simple (204-200) times 1,000 difference.

  1. AProfit of ₹4,000Correct
  2. BProfit of ₹8,000
  3. CLoss of ₹4,000
  4. DProfit of ₹2,000

Explanation

Quantity = 2 x 500 = 1,000 shares. Day 1 MTM = (195-200) x 1000 = -5,000. Day 2: from 195 to the square-off price 204 = +9 x 1000 = +9,000. Net = +4,000, which equals (204-200) x 1000. Option 8,000 uses a single-lot gain error with wrong base; -4,000 reverses the sign.

Did you get it right without looking?

One question tells you little. A timed set on Basics of Derivatives shows your real accuracy, how long you take and where you lose marks.

Practise Basics of DerivativesFree diagnostic mock

More Basics of Derivatives questions