NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Options
An investor buys a Nifty put option with strike 22,000 at a premium of Rs 120 per unit. At expiry Nifty settles at 21,700. What is the net profit per unit, ignoring transaction costs?
The net profit is Rs 180 per unit. The put is in the money by 300 points (22,000 minus 21,700), and after subtracting the Rs 120 premium paid, the profit is 180. Ignoring the premium would wrongly give Rs 300.
- ARs 300
- BRs 120
- CRs 180Correct
- DRs 420
Explanation
Put payoff = 22,000 - 21,700 = 300. Net profit = 300 - 120 = 180. Rs 300 ignores the premium paid; Rs 420 wrongly adds the premium instead of subtracting it.
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