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

A trader buys a bull call spread on a stock: buys a 1,000 strike call at Rs 60 and sells a 1,100 strike call at Rs 25, lot size 500. What is the maximum profit per lot?

Maximum profit is Rs 32,500 per lot. The net debit is 35 points, and the spread width is 100 points, so the best outcome is 65 points. Multiplied by the lot size of 500, this gives Rs 32,500, achieved when the stock closes at or above 1,100.

  1. ARs 32,500Correct
  2. BRs 17,500
  3. CRs 50,000
  4. DRs 30,000

Explanation

Net premium paid = 60 - 25 = 35 points. Maximum spread width = 100 points, so maximum profit = 100 - 35 = 65 points. 65 x 500 = Rs 32,500. Rs 17,500 is the maximum loss (35 x 500).

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