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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Options

An investor buys one lot of a Nifty call option with a strike of 22,000 at a premium of Rs 150. The lot size is 50. At expiry, Nifty settles at 22,320. What is the investor's net profit?

The net profit is Rs 8,500. The call finishes 320 points in the money, the premium paid was 150 points, so the net gain is 170 points per unit. Multiplying by the lot size of 50 gives Rs 8,500.

  1. ARs 8,500Correct
  2. BRs 16,000
  3. CRs 7,500
  4. DRs 9,000

Explanation

Intrinsic value at expiry = 22,320 - 22,000 = 320. Net gain per unit = 320 - 150 = 170. For a lot of 50, profit = 170 x 50 = Rs 8,500. Rs 16,000 ignores the premium paid; Rs 7,500 deducts the premium twice only partially and is wrong.

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