NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Options
An investor buys one lot of a stock put option, lot size 500, strike Rs 400, paying a premium of Rs 12 per share. At expiry the stock settles at Rs 370. What is the investor's net profit?
The net profit is Rs 9,000. The put pays 400 minus 370, Rs 30 per share, and after deducting the Rs 12 premium the net gain is Rs 18 per share. Multiplying by the lot size of 500 gives Rs 9,000.
- ARs 9,000Correct
- BRs 15,000
- CRs 6,000
- DRs 18,000
Explanation
Put payoff = 400 - 370 = Rs 30 per share. Net per share = 30 - 12 = Rs 18. Total = 18 x 500 = Rs 9,000. Rs 15,000 is 30 x 500 less nothing wrong? Actually 15,000 is the gross payoff, ignoring premium; Rs 18,000 would be mistakenly adding premium to payoff... check: 30 x 500 = 15,000 gross, so the option Rs 9,000 is correct.
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
- An investor buys a Nifty 22,000 call at Rs 200 and sells a Nifty 22,300 call at Rs 80, same expiry, forming a bull call spread. Lot size is …
- An investor buys a call with strike Rs 300 at premium Rs 12 and buys a put with the same strike and expiry at premium Rs 8, on the same stoc…
- A trader writes one lot of a call option, strike Rs 800, at a premium of Rs 25, lot size 500. At expiry the stock closes at Rs 840. What is …
- 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 one lot (lot size 50) of a Nifty put option with strike 22,000 at a premium of Rs 90. Ignoring costs, at what expiry index l…