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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Accounting and Taxation

An investor buys 1 lot of 500 shares of a stock future at ₹200 and the exchange settles daily. Day 1 settlement price is ₹204, and Day 2 settlement price is ₹199. What is the cumulative MTM position at the end of Day 2 (as per accounting of margin/MTM)?

The cumulative MTM is a loss of ₹500. Day 1 gives a gain of ₹2,000 on 500 shares, Day 2 gives a loss of ₹2,500, and the net equals the total price move of minus ₹1 on 500 shares from the entry price of ₹200.

  1. ALoss of ₹500Correct
  2. BGain of ₹500
  3. CGain of ₹2,000
  4. DLoss of ₹2,500

Explanation

Day 1 MTM = (204-200)x500 = +₹2,000 gain. Day 2 MTM = (199-204)x500 = -₹2,500. Cumulative = 2,000-2,500 = -₹500, which equals (199-200)x500. The gain of ₹2,000 is only Day 1, and ₹2,500 ignores the earlier gain.

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