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

An investor expects the index to rise moderately but not beyond 23,000 and buys a 22,500 call for Rs 200 while selling a 23,000 call for Rs 80. What is the maximum possible profit per unit at expiry?

The maximum profit is Rs 380 per unit. The spread costs a net premium of Rs 120, and the strikes are 500 apart, so the best outcome at or above 23,000 is 500 minus 120, which equals 380.

  1. ARs 380Correct
  2. BRs 500
  3. CRs 120
  4. DRs 280

Explanation

This is a bull call spread with net debit = 200 - 80 = 120. Maximum profit = strike difference - net debit = 500 - 120 = 380, reached at or above 23,000. Rs 120 is the maximum loss, not profit.

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