NISM Certifications · NISM-Series-VIII: Equity Derivatives · Strategies using Equity Futures and Equity Options
An investor buys a call option with strike ₹1,200 for a premium of ₹40 and simultaneously sells a call option with strike ₹1,260 for a premium of ₹15 on the same stock and expiry. What is the maximum profit per share on this bull call spread?
The maximum profit is ₹35 per share. The spread costs a net premium of ₹25, and the maximum payoff is the ₹60 difference between strikes, reached when the stock closes at or above ₹1,260 at expiry.
- A₹35Correct
- B₹25
- C₹60
- D₹85
Explanation
Net premium paid = 40 - 15 = ₹25. Maximum payoff is the strike difference, 1,260 - 1,200 = ₹60. Maximum profit = 60 - 25 = ₹35, achieved at or above ₹1,260. Using only the net premium (25) is the error in a distractor.
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