NISM Certifications · NISM-Series-VIII: Equity Derivatives · Basics of Derivatives
A trader buys one lot of a stock future (lot size 500) at Rs 200. At the end of day 1 the settlement price is Rs 204, and at the end of day 2 it is Rs 199. What is the cumulative MTM position of the trader after day 2?
The trader has a cumulative loss of Rs 500. Day 1 gives a gain of Rs 2,000 and day 2 a loss of Rs 2,500, which nets to minus Rs 500, equal to (199 minus 200) times 500 shares on the long position.
- ALoss of Rs 500
- BProfit of Rs 500Correct
- CProfit of Rs 2,500
- DLoss of Rs 2,500
Explanation
Day 1: (204-200) x 500 = +2,000. Day 2: (199-204) x 500 = -2,500. Net = -500, i.e., a loss of Rs 500. Check: (199-200) x 500 = -500. Hence the cumulative position is a loss of Rs 500, not a profit.
Did you get it right without looking?
One question tells you little. A timed set on Basics of Derivatives shows your real accuracy, how long you take and where you lose marks.
More Basics of Derivatives questions
- An investor holds a portfolio of shares worth Rs 50 lakh with a beta of 1.2 against the Nifty. To hedge fully using Nifty futures, the inves…
- A trader buys one lot of Nifty futures of 50 units at 22,000. The next day's settlement price is 22,060 and the day after it is 22,010. What…
- In a derivatives contract, the asset or variable from which the contract derives its value is known as the:
- Which of the following best describes the role of a 'hedger' in the derivatives market?
- An investor buys 2 lots of Nifty futures at 22,000, lot size 75. At the end of day 1 the settlement price is 22,060. On day 2 the investor s…
- A trader sells 2 lots of a stock future (lot size 250) at Rs 800. Day 1 settlement price is Rs 792. On Day 2 the trader squares off the posi…