Evaluate the net payoff for Ms. Manisha who has: Long call strike 125.50 (premium Rs 0.60), Long call strike 126.50 (premium Rs 0.20), Two short calls strike 126.00 (premium received Rs 0.30 each), Underlying settles at ₹127.

Practice question from NISM Series IV - Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

Rs - 0.20

Correct answer
B

0
C

Rs. 0.25
D

Rs. - 0.40

Why this is the answer

Long 125.50 call payoff = 127 − 125.50 = 1.5, Short 126.00 calls = 2 × (126 − 127) = -2, Long 126.50 call = 127 − 126.50 = 0.5, Total payoff before premiums: 1.5 - 2 + 0.5 = 0, Total premiums paid = 0.6 + 0.2 = 0.8; premiums received = 2 × 0.3 = 0.6, Net premium paid = 0.8 − 0.6 = 0.2, Net payoff = 0 − 0.2 = -0.2

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NISM Series IV - Mock Test 3