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

A trader buys a Nifty 22,000 call at a premium of Rs 150 and buys a Nifty 22,000 put at a premium of Rs 100, both with the same expiry. What are the breakeven levels at expiry?

The breakevens are 21,750 and 22,250. The long straddle costs a combined premium of 250 points, so the index must move 250 points above or below the 22,000 strike at expiry for the position to recover its cost.

  1. A21,750 and 22,250Correct
  2. B21,900 and 22,100
  3. C21,850 and 22,150
  4. D21,800 and 22,200

Explanation

This is a long straddle with total premium paid 150 + 100 = 250 points. Upper breakeven = 22,000 + 250 = 22,250 and lower breakeven = 22,000 - 250 = 21,750. Using only one premium (150 or 100) gives the wrong levels.

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