Premium recieved by him is 7.5 and he sells a call option of strike price 200 and at expiry NTPC becomes 207.5. He will lose his entire premium and thus no profit and no loss.
Think like this:
You have sold a call, you will receive premium right? Toh aaj ghar mein 7.5 aaya premium ka buyer se.
Ab 200 ke upar jitna jayega utna apne ko dena padega buyer ko. 207.5 par expiry hua, toh 207.5 – 200 = 7.5 ka loss. Yeh 7.5 dena padega but apne ko pehle premium ka 7.5 mila hua hai.
Toh net net mein ghar se kuch nahi gaya apna. No profit no loss.
Answer should be D.
Premium recieved by him is 7.5 and he sells a call option of strike price 200 and at expiry NTPC becomes 207.5. He will lose his entire premium and thus no profit and no loss.
but now as the price rises i have to pay back to the buyer of the call , which is 1625 x 7.5= 12187
Yes he has to but he recieved the same amount as premium.
i am unable to understand why we are paying premium on all the shares .
Think like this:
You have sold a call, you will receive premium right? Toh aaj ghar mein 7.5 aaya premium ka buyer se.
Ab 200 ke upar jitna jayega utna apne ko dena padega buyer ko. 207.5 par expiry hua, toh 207.5 – 200 = 7.5 ka loss. Yeh 7.5 dena padega but apne ko pehle premium ka 7.5 mila hua hai.
Toh net net mein ghar se kuch nahi gaya apna. No profit no loss.