Radha bought a 3-month call option on A Ltd.'s share with an exercise price of ₹50 at a premium of ₹4. She has also bought a put option on the same share at an exercise price of ₹40 at a premium of ₹1.50. A's share is cu

Given: Call Option: Exercise Price (X C ) = ₹50, Premium = ₹4 Put Option: Exercise Price (X P ) = ₹40, Premium = ₹1.50 Current Share Price = ₹45 Total Premium Paid = ₹4 (Call) + ₹1.50 (Put) = ₹5.50 Profit or loss on expiration: (a) If share price (S T ) is ₹50: If S T = ₹50, then: Call Option: S T (₹50) is not greater than X C (₹50). So, the call option will not be exercised (value = 0). Put Option: S T (₹50) is not less than X P (₹40). So, the put option will not be exercised (value = 0). In this case, neither the call nor the put option will be exercised. Radha will lose the entire premium paid. Profit/Loss = Value of Call Option + Value of Put Option - Total Premium Paid Profit/Loss = ₹0 + ₹0 - ₹5.50 = -₹5.50 Loss of ₹5.50 (b) If share price (S T ) is ₹30: If S T = ₹30, then: Call Option: S T (₹30) is not greater than X C (₹50). So, the call option will lapse (value = 0). Put Option: S T (₹30) is less than X P (₹40). So, the put option will be exercised. Value of Put Option = X P - S T = ₹40 - ₹30 = ₹10 Profit/Loss = Value of Call Option + Value of Put Option - Total Premium Paid Profit/Loss = ₹0 + ₹10 - ₹5.50 = ₹4.50 Profit of ₹4.50