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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Clearing and Settlement System

A trader buys 2 lots of a stock futures contract (lot size 500) at Rs 400. The daily settlement price that day is Rs 410. The next day's settlement price is Rs 404. What is the MTM amount for the second day for the trader?

The trader has a loss of Rs 6,000. The position of 1,000 units is marked from the previous day's settlement price of Rs 410 to Rs 404, a fall of Rs 6, and a long position loses when the price falls.

  1. ALoss of Rs 6,000Correct
  2. BProfit of Rs 6,000
  3. CLoss of Rs 4,000
  4. DProfit of Rs 4,000

Explanation

Quantity = 2 x 500 = 1,000 units. On day 2, the position is marked from the previous settlement price of 410 to 404, a fall of Rs 6. Long position loss = 6 x 1,000 = Rs 6,000. Using the original price of 400 would wrongly give a Rs 4,000 profit.

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