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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Basics of Derivatives

An investor buys a call option on a stock with a strike of Rs 500 for a premium of Rs 20, and the same investor also buys a put option on the same stock with a strike of Rs 500 for a premium of Rs 15, same expiry. At expiry the stock closes at Rs 560. What is the net profit per share of the combined position?

The net profit is Rs 25 per share. The call is worth Rs 60 at expiry, while the put expires worthless. The total premium paid on both options is Rs 35, so net profit is 60 minus 35, which equals Rs 25.

  1. ARs 25Correct
  2. BRs 60
  3. CRs 35
  4. DRs 45

Explanation

Call payoff = 560 - 500 = Rs 60. Put expires worthless with payoff 0. Total premium paid = 20 + 15 = Rs 35. Net profit = 60 - 35 = Rs 25. Rs 45 deducts only the call premium; Rs 35 is the premium alone.

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