The Nifty Index was trading at 11025 on 1st February, 2019 on NSE. The put option of 10800 with expiry date of 28th February, 2019 was available at ₹ 50 per lot and the call option of 11300 with same expiry date was avai

CS Executive · Securities Laws and Capital Markets · PYQS · December 2020
The Nifty Index was trading at 11025 on 1st February, 2019 on NSE. The put option of 10800 with expiry date of 28th February, 2019 was available at ₹ 50 per lot and the call option of 11300 with same expiry date was available at ₹ 30 per lot. The size of one lot of Nifty is 75. Ganesh who is regular trader in stock market purchased 2 lots of put options of 10800 and one lot of call option of 11300. On 22nd February, 2019, the Nifty Index was trading at 10850. Ganesh decided to square off all these transactions. At the time of squaring off, the call option of 10800 could be sold at ₹ 80 and put option could be sold at ₹ 5. Calculate the Net gain/loss from this transaction considering the transaction charges including brokerage is fixed at ₹ 100 per lot (buy or sale).

Answer & Explanation:

Computation of Profit and loss for Ganesh (in ₹) (in ₹) Sale Proceeds Put option: 5 x 2 x 75 750 Call option: 80 x 1 x 75 6000 6750 6750 Cost of options Put option: 50 x 2 x 75 7500 Call option: 30 x 1 x 75 2250 (-)9750 Gross loss (A) -3000 Add: Transaction cost (100 x 3 x 2) (B) -600 Net Loss (A+B) -3600

Topics: Derivatives

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