Akshay buys 500 shares of PQR Limited @ ₹210 per share on the stock exchange platform. In order to hedge the position, he sells 300 futures of PQR Limited @ ₹195 each. Due to fall in the share and futures price by 5% and
CS Executive · Securities Laws and Capital Markets · PYQS · June 2021
Akshay buys 500 shares of PQR Limited @ ₹210 per share on the stock exchange platform. In order to hedge the position, he sells 300 futures of PQR Limited @ ₹195 each. Due to fall in the share and futures price by 5% and 3% respectively on next day, Akshay closes his position by counter transactions. Find out his profit or loss.
Answer & Explanation:
Profit or loss in case of buying 500 shares of PQR Ltd. Buying Cost = 500 x ₹210 = ₹1,05,000 Selling price = 500 x [₹210 – (5% of ₹210)] = ₹99,750 Loss = (₹1,05,000 – ₹99,750) = ₹5,250 Profit or Loss in case of Future 300 shares of PQR Ltd. Selling Value = 300 x ₹195 = ₹58,500 Buying Value = 300 x [₹195 – (3% of ₹195)] = ₹56,745 Profit = (₹58,500 – ₹56745) = ₹1,755 Net Loss = ₹5,250 – ₹1,755 = ₹3,495
Topics: Derivatives Market
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