NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Options
An investor buys a call with strike Rs 300 at premium Rs 12 and buys a put with the same strike and expiry at premium Rs 8, on the same stock. What are the breakeven prices at expiry?
The breakevens are Rs 280 and Rs 320. This long straddle costs a combined premium of Rs 20, so the stock must move Rs 20 above or below the Rs 300 strike for the position to recover its cost.
- ARs 280 and Rs 320Correct
- BRs 288 and Rs 308
- CRs 292 and Rs 312
- DRs 300 only
Explanation
This is a long straddle with total premium 12 + 8 = Rs 20. Upper breakeven = 300 + 20 = 320; lower breakeven = 300 - 20 = 280. Using only one premium each side gives wrong values such as 288 and 308.
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