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

A trader sells one lot of 500 shares of a stock futures contract at Rs 800. The daily settlement prices are Rs 790 on day 1, Rs 805 on day 2, and he closes out the position on day 3 at Rs 795. What is his total net profit or loss over the three days?

The trader makes a net profit of Rs 2,500. Selling at Rs 800 and buying back at Rs 795 gives Rs 5 per share on 500 shares, and the daily MTM amounts of 5,000, minus 7,500 and 5,000 add up to the same figure.

  1. ALoss of Rs 2,500
  2. BProfit of Rs 2,500Correct
  3. CProfit of Rs 7,500
  4. DLoss of Rs 7,500

Explanation

Short position: day 1 gain = (800-790)*500 = 5,000. Day 2 = (790-805)*500 = -7,500. Day 3 = (805-795)*500 = 5,000. Total = 5,000-7,500+5,000 = Rs 2,500 profit. Check: (800-795)*500 = 2,500.

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