Skip to content

NISM Certifications · NISM-Series-VIII: Equity Derivatives · Strategies using Equity Futures and Equity Options

A trader sells one lot (lot size 500) of a stock futures contract at Rs 800. Initial margin is 12% of contract value. The next day's settlement price is Rs 812 and the day after it is Rs 805. Ignoring other charges, what is the cumulative MTM position after the second day and the day-one MTM?

The short trader loses Rs 6,000 on day one as the price rises by Rs 12 on 500 units, then gains Rs 3,500 when it falls Rs 7 on day two, leaving a cumulative MTM loss of Rs 2,500.

  1. ADay 1 loss Rs 6,000; cumulative loss Rs 2,500Correct
  2. BDay 1 gain Rs 6,000; cumulative gain Rs 2,500
  3. CDay 1 loss Rs 6,000; cumulative loss Rs 6,000
  4. DDay 1 loss Rs 12,000; cumulative loss Rs 5,000

Explanation

Short position loses when price rises. Day 1: (812-800) x 500 = Rs 6,000 loss. Day 2: price falls 7, gain 7 x 500 = Rs 3,500. Cumulative = -6,000 + 3,500 = loss Rs 2,500, also (805-800) x 500 = 2,500 loss.

Did you get it right without looking?

One question tells you little. A timed set on Strategies using Equity Futures and Equity Options shows your real accuracy, how long you take and where you lose marks.

Practise Strategies using Equity Futures and Equity OptionsFree diagnostic mock

More Strategies using Equity Futures and Equity Options questions