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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Strategies using Equity Futures and Equity Options

A trader buys 2 lots of stock futures at Rs 800 (lot size 500 shares per lot). Day 1 settlement price is Rs 812. On day 2 the trader sells both lots at Rs 805 during the day, and the day 2 settlement price is Rs 808. What is the total MTM cash flow on day 2 for the trader?

The trader has a loss of Rs 7,000 on day 2. The position brought forward is valued at the previous settlement price of Rs 812 and squared off at Rs 805, a fall of Rs 7 on 1,000 shares.

  1. ALoss of Rs 7,000Correct
  2. BGain of Rs 3,000
  3. CLoss of Rs 3,000
  4. DGain of Rs 5,000

Explanation

On day 2, the position carried from day 1 is marked from the previous settlement price 812 and closed at 805: loss = (805 - 812) x 1,000 shares = Rs 7,000. The day 2 settlement price does not apply as the position is closed. Using the 808 settlement or the 800 entry price gives wrong figures.

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