NISM Certifications · NISM-Series-VIII: Equity Derivatives · Strategies using Equity Futures and Equity Options
A trader expects a large move in a stock but is unsure about direction, and buys a call and a put with the same strike of ₹300 and same expiry, paying premiums of ₹12 and ₹8. What are the break-even prices at expiry?
The break-even prices are ₹280 and ₹320. The long straddle costs a combined premium of ₹20, so the stock must move at least ₹20 above or below the ₹300 strike by expiry for the trader to make a profit.
- A₹280 and ₹320Correct
- B₹288 and ₹312
- C₹292 and ₹308
- D₹300 only
Explanation
This is a long straddle with total premium 12 + 8 = ₹20. Break-evens are strike plus premium (320) and strike minus premium (280). Distractors use only one premium or ignore combining them.
Did you get it right without looking?
One question tells you little. A timed set on Strategies using Equity Futures and Equity Options shows your real accuracy, how long you take and where you lose marks.
More Strategies using Equity Futures and Equity Options questions
- An investor buys a Nifty call option with strike 22,000 at a premium of Rs 150 and simultaneously buys a Nifty put option with the same stri…
- An investor holds a diversified equity portfolio and wants to protect against a fall in market value over the next two months without giving…
- A covered call strategy involves holding the underlying shares and doing what else?
- An investor buys a bull call spread on a stock: buys a Rs 1,000 call at premium Rs 45 and sells a Rs 1,050 call at premium Rs 20. What is th…
- An investor buys a Nifty call option with strike 22,000 at a premium of Rs 150 and simultaneously sells a Nifty call with strike 22,200 at a…
- An investor buys a stock at Rs 800 and writes a call with strike Rs 850 for a premium of Rs 25 (covered call). What is the maximum profit pe…