Skip to content

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 20 per share. At expiry the stock settles at Rs 745. What is the investor's net profit?

The net profit is Rs 17,500. The put pays 800 minus 745, which is Rs 55 per share; after subtracting the Rs 20 premium the net gain is Rs 35 per share, and across 500 shares this equals Rs 17,500.

  1. ARs 17,500Correct
  2. BRs 27,500
  3. CRs 10,000
  4. DRs 37,500

Explanation

Put payoff = 800 - 745 = 55 per share. Net = 55 - 20 = 35 per share. Multiply by 500 = Rs 17,500. Rs 27,500 is the gross payoff without deducting the premium; Rs 10,000 is the premium alone.

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.

Practise Introduction to OptionsFree diagnostic mock

More Introduction to Options questions