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

A trader buys 200 Nifty futures units at Rs 22,000. At the day's close the settlement price is Rs 22,050. The next day he squares off at Rs 22,030. What is his total profit across both days, and what is the MTM amount settled on day 2?

Total profit is Rs 6,000, being (22,030 - 22,000) x 200. Day 1 MTM gave a profit of Rs 10,000 and on day 2 the price fell from the settlement price of 22,050 to 22,030, giving an MTM loss of Rs 4,000.

  1. ATotal profit Rs 6,000; day 2 MTM is a loss of Rs 4,000Correct
  2. BTotal profit Rs 10,000; day 2 MTM is a profit of Rs 4,000
  3. CTotal profit Rs 6,000; day 2 MTM is a profit of Rs 4,000
  4. DTotal profit Rs 10,000; day 2 MTM is a loss of Rs 4,000

Explanation

Day 1 MTM = (22,050 - 22,000) x 200 = Rs 10,000 profit. Day 2 MTM = (22,030 - 22,050) x 200 = Rs 4,000 loss. Total = 10,000 - 4,000 = Rs 6,000, which also equals (22,030 - 22,000) x 200. The profit-with-Rs-10,000 options ignore the day 2 loss.

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