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: ₹350.

Answer & Explanation:

The price of stock is below the exercise price of the call, the call will not be exercised but put is valuable and is exercised. Total premium paid: ₹3000 is calculated above Ending value: ₹-3000 + [(₹430 - ₹350) × 100 shares] Net Gain: ₹5000

Topics: Derivatives Market

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