Finance Junkie
Posts: 89
Joined: Sat Apr 01, 2017 2:12 pm


Postby sanbiz20 » Tue Sep 26, 2017 4:15 am

Q Suppose both a call option and a put option have been written on a stock with a exercise price of Rs 50. The Current stock price is Rs 52, and the call & put premiums are Rs 3 & 1 respectively.

Calculate the profit to long & short positions for both the put & call with expiration day price at Rs 45.

In this question I have a doubt in calculating the profit/loss for the short call position.

The short call profit should be Rs3-0 = Rs 3 (without taking the current stock price into account)
or should it be Rs 3-Rs7= -Rs 4 as a loss.(taking the current stock price into account)

Kindly comment. Also please advice what is the use of the Current stock price provided here in this question?

Finance Junkie
Posts: 981
Joined: Wed Apr 09, 2014 6:28 am

Re: Derivatives

Postby edupristine » Tue Sep 26, 2017 8:57 am

Since this is not a question of covered call strategy, so the profit/loss will be restricted to Rs.3 for Call option
Long Call = -3 (Loss)
Short Call= +3 (Gain)

The current market price is given just to confuse you. It should not be taken into consideration.

Return to “CFA Level I”


Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to and we will rectify it.