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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 price of 24,000 at a premium of Rs 120. The lot size is 75. If the index settles at 24,200 on expiry, what is the net profit or loss on the position, ignoring costs?

The net profit is Rs 6,000. The call is worth 200 points at expiry (24,200 minus 24,000), the premium paid was 120 points, so the net gain is 80 points. Multiplying by the lot size of 75 gives Rs 6,000.

  1. AProfit of Rs 6,000Correct
  2. BProfit of Rs 15,000
  3. CProfit of Rs 9,000
  4. DLoss of Rs 9,000

Explanation

Intrinsic value at expiry = 24,200 - 24,000 = 200. Net per unit = 200 - 120 = 80. For one lot of 75: 80 x 75 = Rs 6,000 profit. Rs 15,000 ignores the premium paid (200 x 75). Rs 9,000 is the premium alone (120 x 75), not the net result.

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