NISM Certifications · NISM-Series-VIII: Equity Derivatives · Basics of Derivatives
An investor writes a put option with strike Rs 300 and receives a premium of Rs 12. What is the breakeven price of the position at expiry?
The breakeven is Rs 288. A put writer keeps the Rs 12 premium, and starts losing only when the stock falls below the strike minus the premium, which is 300 minus 12. Above Rs 288 the position is profitable overall.
- ARs 312
- BRs 288Correct
- CRs 300
- DRs 276
Explanation
The put writer loses once the price falls below strike minus the premium received. Breakeven = 300 − 12 = Rs 288. Rs 312 is the call-writer breakeven mistake; Rs 276 subtracts the premium twice.
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