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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Forwards and Futures

A trader buys 2 lots of a stock futures contract, lot size 500, at Rs 200. The daily settlement prices are Rs 204 on day 1 and Rs 199 on day 2. What is the cumulative MTM position at the end of day 2?

The cumulative position is a loss of Rs 1,000. The trader holds 1,000 units, and the price moved from Rs 200 to Rs 199 overall, a fall of Re 1 per unit on a long position, so the net MTM is a Rs 1,000 loss.

  1. AProfit Rs 1,000
  2. BLoss Rs 1,000Correct
  3. CLoss Rs 5,000
  4. DProfit Rs 4,000

Explanation

Quantity = 2 x 500 = 1,000 units. Day 1 gain = (204-200) x 1,000 = Rs 4,000. Day 2 loss = (199-204) x 1,000 = Rs 5,000. Net = 4,000 - 5,000 = Rs 1,000 loss, which matches (199-200) x 1,000. Profit Rs 4,000 considers only day 1.

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