Naman had executed following trades on Gama Ltd. stock: Purchased one 3-month call option with a premium of ₹25 at an exercise price of ₹530. Purchased one 3-month put option with a premium of ₹5 at an exercise price of

CS Executive · Securities Laws and Capital Markets · PYQS · December 2018
Naman had executed following trades on Gama Ltd. stock: Purchased one 3-month call option with a premium of ₹25 at an exercise price of ₹530. Purchased one 3-month put option with a premium of ₹5 at an exercise price of ₹430. The lot size is 100 share per lot and the current price of Gama Ltd. stock is ₹500. Determine Naman's profit or loss, if the price of Gama Ltd. stock after 3 months is: ₹500

Answer & Explanation:

Total premium paid on purchasing a call and put option: = (₹25 per share × 100 shares) + (₹5 per share × 100 shares) In this case, Naman neither exercises the call option nor the put option, as both will result in a loss for him. Ending value: ₹3000 + Nil gain i.e. Net Loss: ₹3000

Topics: Derivatives Market

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic