NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Derivatives
An investor buys a Nifty call option and pays a premium of Rs 120 per unit. The strike price is 22,000. At expiry the Nifty settles at 22,300. What is the net profit per unit to the buyer?
The net profit is Rs 180 per unit. The call's intrinsic value at expiry is 22,300 minus 22,000, which is Rs 300, and subtracting the Rs 120 premium paid gives Rs 180.
- ARs 300
- BRs 180Correct
- CRs 120
- DRs 420
Explanation
Intrinsic value at expiry = 22,300 - 22,000 = Rs 300. Net profit = 300 - premium 120 = Rs 180. Rs 300 ignores the premium; Rs 420 wrongly adds the premium.
Did you get it right without looking?
One question tells you little. A timed set on Derivatives shows your real accuracy, how long you take and where you lose marks.
More Derivatives questions
- A PMS portfolio holds equity worth Rs 10 crore with a beta of 1.0 against the Nifty. The manager wants to hedge fully using Nifty futures wi…
- A call option on a stock has a strike price of Rs 500 and the stock trades at Rs 540 in the spot market. The premium is Rs 55. What is the t…
- Which statement about the margin on a futures position is correct?
- An investor buys a call option on a stock with a strike price of Rs 400 and pays a premium of Rs 15 per share. At expiry the stock trades at…
- A PMS investor's portfolio manager buys a put option on the Nifty at a strike of 22,000 for a premium of 150 points, as protection for the p…
- A portfolio manager holds a diversified equity portfolio worth Rs 2 crore and wants to hedge against a short-term market fall without sellin…