Hi Hitesh,
1st of all I would like to clear one thing w.r.t Gold Future is that a trader can trade in 3 different types of Gold futures in MCX:
Gold Guinea, where 1 lot = 8 gms
Gold Mini, where 1 lot = 100 gms
Gold (Standard or HNI), where 1 lot = 1 kg (i.e. 1000 gms)
So, as per your question You buy 1 lot of Gold @ Rs. 1870 per gram and after 2-3 days the price of Gold get reduced by Rs. 70 (i.e. Rs. 1800), your MTM position will be:
For,
Gold Guinea: Price Movement of Rs. 1 in the Gold Guinea price will give you Gain/Loss of Rs. 1
[ Lot size of 8 gms & price quotation of 8 gms. So, 8/8 = Rs. 1 ]
So your MTM position will be here, 70 x 1 = Rs. 70 per Lot
Gold Mini: Price Movement of Rs. 1 in the Gold Mini price will give you Gain/Loss of Rs. 10
[ Lot size of 100 gms & price quotation of 10 gms. So, 100/10 = Rs. 10 ]
So your MTM position will be here, 70 x 10 = Rs. 700 per Lot
Gold: Price Movement of Rs. 1 in the Gold Standard price will give you Gain/Loss of Rs. 100
[ Lot size of 1000 gms & price quotation of 10 gms. So, 1000/10 = Rs. 100 ]
So your MTM position will be here, 70 x 100 = Rs. 7000 per Lot
M2M is calculated on daily basis by the exchange/broker:
Assuming you buys a Gold Standard on Monday @ 18700 during market hours & that day closing is @ 18750. On Tuesday Gold closes @ 18700, on Wednesday @ 18680, Thursday @ 18630, Friday you sold the Gold @ 18720. Then your daily MTM will be calculated as per this:
Buy Price Sell Price Closing Price Difference MTM
Monday 18,700 18,750 50 [ 18750 - 18700 ] 5,000
Tuesday 18,700 -50 [ 18700 - 18750 ] -5,000
Wednesday 18,680 -20 [ 18680 - 18700 ] -2,000
Thursday 18,630 -50 [ 18630 - 18680 ] -5,000
Friday 18,720 18,720 90 [ 18720 - 18630 ] 9,000
Actual Gross Gain / Loss in Rs. 2,000
As a friend, I will always advice you to maintain extra buffer for MTM while trading.
While trading I always trade on the basis of this if the margin for Gold standard is Rs. 80,000 per lot, then I maintain a buffer of 50% of the margin (i.e. Rs. 40,000) or I keep capital of 1.5 times of any margin amount required to trade a commodity. (i.e. Rs. 80,000 x 1.5 = Rs. 1,20,000)