An investor expects the stock market to decline, but instead of selling the equity short, he decided to sell the stock index futures contract based on the XYZ stock exchange composite index. The index is currently 138 an
CS Professional · Capital Commodity and Money Market · PYQS · June 2016
An investor expects the stock market to decline, but instead of selling the equity short, he decided to sell the stock index futures contract based on the XYZ stock exchange composite index. The index is currently 138 and the contract has a value that is 500 times the amount of the index. The margin requirement is ₹3,500 and the maintenance margin requirement is ₹1,000. Based on the above, answer the following: (ii) What is the value of contract based on the index?
Answer & Explanation:
The Value of the contract would be ₹69,000 calculated as (500 * 138). Here, 500 is the size of the contract and 138 is the spot price. Value of a contract = Size of the contract x price per unit represented by spot price.
Topics: Derivatives
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