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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Options

An investor buys a Nifty 22,000 call at Rs 200 and sells a Nifty 22,300 call at Rs 80, same expiry, forming a bull call spread. Lot size is 50. What is the maximum profit per lot and the breakeven?

Maximum profit is Rs 9,000 per lot with breakeven at 22,120. The net debit is Rs 120, so maximum gain per unit is the 300 strike gap less 120, equals 180, times 50 units. Breakeven is the lower strike plus the net debit.

  1. AMaximum profit Rs 9,000; breakeven 22,120Correct
  2. BMaximum profit Rs 9,000; breakeven 22,280
  3. CMaximum profit Rs 15,000; breakeven 22,120
  4. DMaximum profit Rs 7,500; breakeven 22,200

Explanation

Net debit = 200 - 80 = 120. Maximum gain per unit = spread width 300 - 120 = 180, times 50 = Rs 9,000. Breakeven = lower strike + net debit = 22,000 + 120 = 22,120. Rs 15,000 ignores the net debit; breakeven 22,280 wrongly uses the upper strike minus debit.

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