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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Strategies using Equity Futures and Equity Options

An investor buys a Nifty call option with strike 22,000 at a premium of Rs 150 and simultaneously sells a Nifty call with strike 22,200 at a premium of Rs 60 (same expiry). What is the maximum profit per unit of this bull call spread?

The maximum profit is Rs 110 per unit. The spread width is Rs 200, and the net premium paid is Rs 90 (150 minus 60), so the best outcome, reached at or above 22,200, is 200 minus 90, which equals Rs 110.

  1. ARs 110Correct
  2. BRs 90
  3. CRs 200
  4. DRs 150

Explanation

Net premium paid = 150 - 60 = Rs 90. Maximum spread value = 22,200 - 22,000 = Rs 200. Maximum profit = 200 - 90 = Rs 110. Rs 90 is the maximum loss, not the profit; Rs 200 ignores the net premium.

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