Skip to content

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

An investor buys a Rs 1,000 strike call at a premium of Rs 60 and sells a Rs 1,100 strike call at a premium of Rs 20, same expiry (bull call spread). What is the maximum profit per share?

The maximum profit is Rs 60 per share. The spread width is Rs 100 and the net premium paid is Rs 40, so the best outcome, reached at or above Rs 1,100, is 100 minus 40, equal to Rs 60.

  1. ARs 40
  2. BRs 60Correct
  3. CRs 100
  4. DRs 140

Explanation

Net debit = 60 - 20 = Rs 40. Maximum payoff = difference in strikes = Rs 100. Maximum profit = 100 - 40 = Rs 60. Rs 40 is the maximum loss, not the profit.

Did you get it right without looking?

One question tells you little. A timed set on Strategies using Equity Futures and Equity Options shows your real accuracy, how long you take and where you lose marks.

Practise Strategies using Equity Futures and Equity OptionsFree diagnostic mock

More Strategies using Equity Futures and Equity Options questions