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

A trader holds a long position in 1 lot (lot size 250) of stock futures bought at Rs 1,200 on day 1. Day 1 settlement price is Rs 1,190. On day 2 she sells the position at Rs 1,215, and the day 2 settlement price is Rs 1,205. What is the total amount settled for day 2 (MTM on the closed position), and total overall P&L?

Day 2 settlement is a receipt of Rs 6,250 and overall profit is Rs 3,750. The closing leg is settled against the previous settlement price: (1,215 - 1,190) x 250 = Rs 6,250. Netting the day 1 loss of Rs 2,500 gives Rs 3,750, equal to (1,215 - 1,200) x 250.

  1. ADay 2 pay-in Rs 2,500 received; overall profit Rs 3,750
  2. BDay 2 receipt Rs 6,250; overall profit Rs 3,750Correct
  3. CDay 2 receipt Rs 3,750; overall profit Rs 3,750
  4. DDay 2 receipt Rs 6,250; overall profit Rs 6,250

Explanation

Day 1 MTM is (1190-1200) x 250 = Rs 2,500 loss. On day 2 the position is closed at 1,215, so the settlement is (1215-1190) x 250 = Rs 6,250 received. Overall P&L is (1215-1200) x 250 = Rs 3,750, which equals -2,500 + 6,250. Using 1,205 instead of the sale price gives wrong figures.

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