NISM Certifications · NISM-Series-VIII: Equity Derivatives · Trading Mechanism
A trader buys 2 lots of a stock futures contract (lot size 500) at Rs 400 on day 1. The day 1 settlement price is Rs 405 and the day 2 settlement price is Rs 398. Ignoring charges, what is the cumulative MTM position at the end of day 2 relative to the purchase price?
The cumulative position is a loss of Rs 2,000. Day one gains Rs 5,000 as price rises from 400 to 405, day two loses Rs 7,000 as it falls to 398, and the net equals the price change of minus Rs 2 on 1,000 shares.
- ALoss of Rs 2,000Correct
- BProfit of Rs 2,000
- CLoss of Rs 7,000
- DProfit of Rs 5,000
Explanation
Quantity = 2 x 500 = 1,000. Day 1 MTM = (405-400) x 1,000 = +5,000. Day 2 MTM = (398-405) x 1,000 = -7,000. Net = -2,000, which matches (398-400) x 1,000 = -2,000. Rs 7,000 ignores the day 1 gain.
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