A speculator purchases BFL Ltd. May Futures (lot of 125 shares) at 7750 and chooses to Write BFL 7790 May call option with a premium of 30 (lot of…

CA Final · Advanced Financial Management · PYQS · January 2026
A speculator purchases BFL Ltd. May Futures (lot of 125 shares) at 7750 and chooses to Write BFL 7790 May call option with a premium of 30 (lot of 125 shares). As on May 18, spot prices rise and so the futures price and call premium. Futures price rise to 7780. Call premium also rises to 36. Brokerage for the transaction is 0.02% for the transaction value of futures and strike price net of call premium for options. You are required to calculate: (i) Profit/Loss on Futures net of transaction costs. (ii) Profit/Loss on options net of transaction costs. (iii) Overall profit from both the positions net of costs. (iv) Total Brokerage cost.

Suggested Answer and Working Notes:

Working Notes: (1) Brokerage Payable on Initial Position On Futures (7750 x 125 x 0.02%) 193.75 On Options (7790 - 30) x 0.02% x 125 194.00 Total 387.75 (2) Brokerage Payable on Closing Position On Futures (7780 x 125 x 0.02%) 194.50 On Options (7790 - 36) x 0.02% x 125 193.85 Total 388.35 (i) Profit/Loss on Futures (₹) Selling Futures 7,780 Buying Futures 7,750 Profit per share 30 Total Profit 125 x 30 3,750.00 Less: Brokerage on Initial Position 193.75 Brokerage on Closing Position 194.50 Net Profit 3,361.75 (ii) Profit/Loss on Options (₹) Loss on writing Call Option (₹ 36 -30) 6 Loss on Call Option (125 x 6) 750.00 Add: Brokerage Paid on Initial Position 194.00 Brokerage on Closing Position 193.85 Net Loss 1,137.85 (iii) Overall profit: (₹) Profit/ Loss on Futures (Net Profit) 3,361.75 Less: Profit/Loss on Options (Net Loss) 1,137.85 Overall Profit 2,223.90 (iv) Total Broking Cost (₹) On Initial Position 387.75 On Options 388.35 Total 776.10

Topics: Derivatives Analysis & Valuation

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