Skip to content

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

An investor buys one lot of a stock call option with strike Rs 500 at a premium of Rs 12, and the lot size is 1,000. At expiry the stock settles at Rs 530. What is the net profit of the buyer?

The buyer's net profit is Rs 18,000. The call is worth Rs 30 at expiry (530 minus 500), and after deducting the Rs 12 premium the gain is Rs 18 per share, which is Rs 18,000 on a lot of 1,000.

  1. ARs 30,000
  2. BRs 18,000Correct
  3. CRs 12,000
  4. DRs 42,000

Explanation

Intrinsic value at expiry = 530 - 500 = Rs 30. Net gain per share = 30 - 12 = Rs 18. For 1,000 shares the profit is Rs 18,000. Rs 30,000 ignores the premium paid.

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