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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Forwards and Futures

A trader sells 3 lots of a stock future (lot size 1,000) at Rs 500. Initial margin is 10% of contract value. On day 1 the settlement price is Rs 508. Assuming the margin balance is only adjusted for MTM and no other flows, what is the margin balance after day 1 MTM?

The margin balance is Rs 1,26,000. Initial margin on a Rs 15,00,000 position is Rs 1,50,000. The short seller loses Rs 8 on 3,000 shares, which is Rs 24,000, because the price rose, and this is deducted from the margin.

  1. ARs 1,50,000
  2. BRs 1,44,000Correct
  3. CRs 1,56,000
  4. DRs 1,26,000

Explanation

Contract value = 3 x 1,000 x 500 = 15,00,000. Initial margin = 1,50,000. Short loses when price rises: (508-500) x 3,000 = 24,000 loss. Balance = 1,50,000 - 24,000 = 1,26,000. So the correct answer is Rs 1,26,000.

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