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

A trader sells 3 lots of index futures (lot size 50) at 22,000. The next day's daily settlement price is 22,120. On the following day he squares off at 22,050. What is his MTM on day 1 and the final-day settlement amount on the square-off day, respectively?

Day 1 shows a loss of Rs 18,000 and the square-off day shows a gain of Rs 10,500. The short position of 150 units loses when the price rises from 22,000 to 22,120, then gains when bought back at 22,050, Rs 70 below the previous settlement price.

  1. ADay 1 loss Rs 18,000; square-off day gain Rs 10,500Correct
  2. BDay 1 gain Rs 18,000; square-off day loss Rs 10,500
  3. CDay 1 loss Rs 18,000; square-off day loss Rs 10,500
  4. DDay 1 loss Rs 6,000; square-off day gain Rs 3,500

Explanation

Quantity = 150. As a seller, day 1: (22,000 - 22,120) x 150 = -Rs 18,000. On square-off, the buy price is 22,050 against the previous settlement of 22,120: (22,120 - 22,050) x 150 = +Rs 10,500. Net = -Rs 7,500, which matches (22,000 - 22,050) x 150.

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