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

A trader buys 200 units of a stock futures contract at Rs 500. At the end of day 1 the settlement price is Rs 508. On day 2 the trader sells the position at Rs 503 during the day. What is the total profit for the trader over both days, and how is day 2 MTM computed for the closed position?

Day 1 MTM is a gain of Rs 1,600 (8 x 200). On day 2 the position closes at 503 versus the previous settlement of 508, a loss of Rs 1,000. Net profit is Rs 600, equal to (503-500) x 200.

  1. ARs 600 total; day 2 MTM is a loss of Rs 1,000 (sale price 503 vs previous settlement 508 on 200 units)Correct
  2. BRs 600 total; day 2 MTM is a gain of Rs 1,000
  3. CRs 1,600 total; day 2 MTM is nil
  4. DRs 1,000 total; day 2 MTM is a loss of Rs 600

Explanation

Day 1 MTM = (508-500)x200 = +1,600. Day 2 the position is closed at 503 against the previous settlement of 508: (503-508)x200 = -1,000. Total = 1,600-1,000 = Rs 600, which also equals (503-500)x200. The gain option is wrong because the sign is reversed.

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