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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Trading Mechanism

Index futures are trading at 22,000 with lot size 50. A trader sells 3 lots at 22,000. On day 1 the settlement price is 22,120, and on day 2 the position is closed at 21,950. What is the total net profit or loss on the trade?

The trader sold 150 units at 22,000 and bought back at 21,950, so the net profit is 50 x 150 = Rs 7,500. Daily MTM of a Rs 18,000 loss on day 1 and a Rs 25,500 gain on day 2 reconciles to this same figure.

  1. AProfit Rs 7,500Correct
  2. BLoss Rs 18,000
  3. CProfit Rs 25,500
  4. DLoss Rs 7,500

Explanation

Short 150 units at 22,000 and closed at 21,950 gives a gain of 50 x 150 = Rs 7,500. The day 1 MTM loss of Rs 18,000 is reversed by a Rs 25,500 gain on day 2 (170 x 150), so the net is Rs 7,500 profit. Rs 18,000 is only the day-1 loss.

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