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. The daily settlement price that day is Rs 508. The next day the trader's position stays open and the daily settlement price is Rs 503. What is the MTM on the second day?
The MTM on the second day is a loss of Rs 1,000. The position is marked against the previous day's settlement price of Rs 508, so the fall to Rs 503 is Rs 5 per unit, multiplied by 200 units.
- ALoss of Rs 1,000Correct
- BProfit of Rs 1,000
- CLoss of Rs 600
- DProfit of Rs 600
Explanation
On day 2, MTM is computed against the previous day's settlement price of Rs 508, not the purchase price. Change = 503 - 508 = -5 per unit, so 200 x -5 = -Rs 1,000, a loss. Using the Rs 500 purchase price (+600) would be the wrong base.
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