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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Basics of Derivatives

An investor buys 2 lots of Nifty futures at 22,000, lot size 75. At the end of day 1 the settlement price is 22,060. On day 2 the investor squares off at 22,010. What is the total net profit or loss on the position, and how is it split across the days' MTM?

The total profit is Rs 1,500. Quantity is 150 units. Day 1 MTM gives a profit of 60 x 150 = Rs 9,000, and day 2 gives a loss of 50 x 150 = Rs 7,500. Net equals (22,010 - 22,000) x 150 = Rs 1,500.

  1. AProfit Rs 1,500 in total; day 1 MTM profit Rs 9,000 and day 2 MTM loss Rs 7,500Correct
  2. BProfit Rs 1,500 in total; day 1 MTM profit Rs 4,500 and day 2 MTM loss Rs 3,000
  3. CProfit Rs 9,000 in total; day 1 MTM profit Rs 9,000 and day 2 nil
  4. DLoss Rs 1,500 in total; day 1 MTM loss Rs 9,000 and day 2 profit Rs 7,500

Explanation

Quantity = 2 x 75 = 150. Day 1 MTM = (22,060 - 22,000) x 150 = Rs 9,000 profit. Day 2 = (22,010 - 22,060) x 150 = -Rs 7,500. Net = Rs 1,500 profit, and check: (22,010 - 22,000) x 150 = Rs 1,500. Using only one lot halves the figures in the other option.

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