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

A trader sells 1 lot (lot size 200) of a futures contract at Rs 1,500. Day 1 settlement price is Rs 1,520. On day 2 the trader holds the position and the settlement price is Rs 1,490. What is the day 2 MTM amount for the trader?

The trader earns a profit of Rs 6,000 on day 2. A short position is marked against the previous settlement price of Rs 1,520, and the price fell to Rs 1,490, a gain of Rs 30 per unit on 200 units.

  1. AProfit of Rs 6,000Correct
  2. BLoss of Rs 6,000
  3. CProfit of Rs 4,000
  4. DLoss of Rs 4,000

Explanation

For a short position, the day 2 MTM is (previous settlement price - current settlement price) x quantity = (1,520 - 1,490) x 200 = Rs 6,000 profit. Using the wrong base of the original sale price Rs 1,500 would give Rs 2,000, and the sign-reversed answer would be a loss.

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