NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Options
An investor buys a put option on a stock with strike Rs 500 for a premium of Rs 18. What is the breakeven price of the stock at expiry for the put buyer?
The breakeven for a long put is the strike price minus the premium paid. Here that is 500 minus 18, giving Rs 482. Below this price at expiry the put buyer earns a net profit, and above it the buyer has a net loss.
- ARs 518
- BRs 482Correct
- CRs 500
- DRs 464
Explanation
A put buyer profits only when the spot falls below strike by more than the premium. Breakeven = strike - premium = 500 - 18 = Rs 482. Rs 518 is the call breakeven formula, wrongly applied here.
Did you get it right without looking?
One question tells you little. A timed set on Introduction to Options shows your real accuracy, how long you take and where you lose marks.
More Introduction to Options questions
- A trader buys a 1,000 strike straddle on a stock by buying a call at Rs 40 and a put at Rs 30 (lot size 200). At expiry the stock is at Rs 1…
- A stock trades at Rs 740. Which of the following call options on this stock, all with the same expiry, is in-the-money and has a time value …
- A trader writes (sells) a call option on a stock with strike Rs 800 and receives a premium of Rs 25. At expiry the stock closes at Rs 840. W…
- A trader buys one lot of a Nifty call option with a strike of 22,000 at a premium of Rs 120. The lot size is 50. At expiry the Nifty settles…
- An investor holds a European-style put option on a stock. Which statement correctly describes when the holder can exercise it?
- An investor buys one Nifty call option with strike 22,000 at a premium of Rs 150. The lot size is 50. At expiry Nifty settles at 22,260. Wha…