How does daily settlement for future contracts work, specially in zerodha?

F&O
1

Let’s say I have 2 lots of short position of STAR JUN FUT ([email protected]).
Assuming that today (not the expiry day) the price of STAR JUN FUT went up by 10 points i.e. price is not 410.

So will Zerodha automatically debit my fund balance by the net loss amount for the day (1200 * 10 = 12000)?

Also is there any Theta value involved in Future contracts as well?

Will appreciate your response on this.

2

Experts @Nitin @siva , could you please help answering this?

3

Yes, we will automatically debit the fund balance by the net loss.

Check this chapter on future pricing

Theoretically Future = Spot + Cost of carry . Cost of carry essentially is like the time value.

4

Thank you @nithin for your response. I have follow up question.

Assuming that the future contract I bought continues to be on loss on 2nd day as well and comes back to profit on the third day. So how does the settlement happen? The position looks something like below:

Day1: SHORT [email protected] . Closing price = 410 ( Loss = 1200 * 10)
Day2: Closing price = 420 . (Loss = 1200 * 20)
Day3: Closing price = 390 (Profit = 1200 * 10). Covered the short position with profit.

So even though the short contract was covered with profitable position on day3, will I end-up making net loss?

Day1 loss = 12000
Day2 loss = 24000
Day3 profit = 12000

Net loss = 24000? Kindly clarify.

5

Third day will be 1200*30 right?

6

Day 1 closing @ 410 (400-410=-10x1200)=-12000
Day 2 open price start with 410 only [email protected] 420 (410-420=-10x1200)=-12000
Day 3 open price 420 [email protected] 390 (420-390=30x1200)=36000

So u can calculate them
Day 1+2+3(-12000±12000+36000)=12000
Obviously your profit 12000