Skip to content

NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Derivatives

An investor buys one Nifty call option with a strike of 22,000 and pays a premium of Rs 150 per unit. The lot size is 50 units. At expiry Nifty settles at 22,400. What is the net profit of the buyer for the lot, ignoring costs?

The net profit is Rs 12,500. The call is worth 400 points at expiry (22,400 minus 22,000), and after deducting the 150 premium the gain is 250 per unit. Multiplying by the lot size of 50 gives Rs 12,500.

  1. ARs 12,500Correct
  2. BRs 20,000
  3. CRs 7,500
  4. DRs 2,500

Explanation

Intrinsic value = 22,400 - 22,000 = 400 per unit. Net gain per unit = 400 - 150 = 250. For 50 units, profit = 250 x 50 = Rs 12,500. Rs 20,000 ignores the premium paid; Rs 7,500 is the premium alone.

Did you get it right without looking?

One question tells you little. A timed set on Derivatives shows your real accuracy, how long you take and where you lose marks.

Practise DerivativesFree diagnostic mock

More Derivatives questions