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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 800, paying a premium of Rs 22 per share. If the stock settles at Rs 740 at expiry, what is the investor's net profit?

The net profit is Rs 19,000. The put gains Rs 60 per share (800 minus 740), the premium paid of Rs 22 is deducted to give Rs 38 per share, and multiplying by the lot size of 500 gives Rs 19,000.

  1. ARs 19,000Correct
  2. BRs 30,000
  3. CRs 11,000
  4. DRs 41,000

Explanation

Payoff per share = 800 - 740 = Rs 60. Net per share = 60 - 22 = Rs 38. Times 500 = Rs 19,000. Rs 30,000 ignores the premium, and Rs 11,000 or Rs 41,000 use wrong signs or amounts.

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