NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Options
A trader buys a put option on a stock with strike Rs 800 for a premium of Rs 25. What is the breakeven price at expiry for the put buyer?
The breakeven is Rs 775. A put buyer needs the stock to fall below the strike by the amount of the premium paid, so the strike of Rs 800 minus the premium of Rs 25 gives the breakeven price.
- ARs 825
- BRs 775Correct
- CRs 800
- DRs 750
Explanation
A put buyer profits only when the spot falls below strike by more than the premium paid. Breakeven = 800 - 25 = Rs 775. Rs 825 adds the premium wrongly (call breakeven logic).
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