NISM Certifications · NISM-Series-VIII: Equity Derivatives · Trading Mechanism
A trader shorts one lot (lot size 100) of a stock future at Rs 1,000 with initial margin of 12% of contract value. Day-end settlement price is Rs 1,040. Assuming the initial margin amount is unchanged and the margin account is credited or debited only with MTM, what is the balance in the margin account after day 1 settlement?
The margin balance is Rs 8,000. The initial margin is 12% of Rs 1,00,000, i.e. Rs 12,000. The short position loses Rs 40 per unit on 100 units, which is Rs 4,000, and this is deducted from the margin, leaving Rs 8,000.
- ARs 16,000
- BRs 8,000Correct
- CRs 4,000
- DRs 12,000
Explanation
Initial margin = 12% x 1,000 x 100 = Rs 12,000. The short loses (1,040 - 1,000) x 100 = Rs 4,000. Balance = 12,000 - 4,000 = Rs 8,000. Rs 16,000 wrongly adds the loss, Rs 4,000 is only the loss.
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