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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Strategies using Equity Futures and Equity Options

A trader buys a 3-month Nifty call with strike 22,000 at a premium of Rs 200 and buys a put with the same strike and expiry at a premium of Rs 150. What is the upper breakeven of this position at expiry?

The upper breakeven is 22,350. A long straddle costs a total premium of 350 points (200 plus 150), and the index must rise 350 points above the strike of 22,000 for the call gains to recover the total premium paid.

  1. A22,350Correct
  2. B21,650
  3. C22,200
  4. D22,150

Explanation

This is a long straddle with total premium paid of 200 + 150 = 350 points. Upper breakeven = 22,000 + 350 = 22,350. Lower breakeven = 22,000 - 350 = 21,650, which is the downside figure and not the upper one.

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