if I am selling a call option (i.e. I am getting a premium at the initial point of time) then if the price goes up by 100 (from 5100 to 5200) that means I have incurred a loss of 10000 (= 2*50*100) but the answer is a profit of Rs 10,000 how?
Share
Strike price = 5100
Premium recieved = Rs. 200×100=20000
NIFTY on expiry = 5200
Loss on call option = 100×100=10000 but he gained Rs. 20000 as premium so he’s left with only Rs. 10000 profit now. So, profit = 100×100=10000.
thnx for the reply
but the rs 200 is charged for whole lot , not for one particular share
so premium received would be 2x 200 = 400
That 200 rupees is for 1 lot and he bought 2 lots of 50 each. It’s mentioned in the question.
sry i didn’t get it
200 for 1 lot
and he sold only 2 lots when calculating premium I have to look for lots only na?
thus, 2lots x 200
Yes 2 lots. But you don’t have to multiply by 2 because each lot =50, so 2 lots = 100. You have to multiply it by 100 not 2.
Hope this helps!
thank you for answering!!!
so we have to multiply premium with total shares or premium with lots ( as mentioned in the question 200 a lot)