Ms. Priya initiated the following option strategy on Omega Industries Limited's equity shares: Transactions executed: (1) Bought one European Call…

CA Final · Advanced Financial Management · PYQS · January 2026
Ms. Priya initiated the following option strategy on Omega Industries Limited's equity shares: Transactions executed: (1) Bought one European Call Option with the following terms: Premium paid :42 per shareStrike Price:620Maturity: 3 months (2) Bought one European Put Option with the following terms: Premium paid :8 per shareStrike Price:480Maturity: 3 months Additional Information: Current Market Price (CMP) of Omega Industries:550 per shareLot size: 150 shares per contractMs. Priya holds the positions until expiration Required: (i) Calculate the net profit/loss in the following scenarios at expiration Share price remains unchanged at 550 Share price declines to 380 Share price appreciates to 680 (ii) Determine the upper and lower breakeven points for this strategy. (Note: Round off all intermediate and final calculations to four decimal places.)

Suggested Answer and Working Notes:

Total Premium Paid (₹ 42 +8) x 150 = 7,500 (i) Net Profit/ Loss under different scenarios: Share price remains unchanged at 550 ❖ None of the options will be exercised and whatever premium paid i.e.7,500 will be net loss. Share price declines to 380 ❖ Call Option is Lapsed and Put Option is exercised. The Net Profit will be as follows: Gain on Per Put Option (₹ 480 -380) 100 Lot Size 150 Total Gain 15,000 Less: Premium Paid 7,500 Net Profit 7,500 Share price appreciates to 680 ❖ Put Option is Lapsed and Call Option is exercised. The Net Profit will be as follows: Gain on Per Call Option (₹ 680 -620) 60 Lot Size 150 Total Gain 9,000 Less: Premium Paid 7,500 Net Profit 1,500 (ii) Break-even Points Upper:620 + 50 = 670 Lower:480 -50 = 430

Topics: Derivatives Analysis & Valuation

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