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NCFM Model Test Paper
Options Trading Strategies Module
Maximum Marks: 100 Test Duration: 120 minutes Pass Marks: 60 Time Left: 108:50 minutes
Correct answers are shown in green. Attempted answers, if wrong, are in red.
The number of breakeven points in a short straddle is/are ____. [ 2 Marks ]
(a) 4
Q1 (b) 1
(c) 2
(d) 0
(e) I am not attempting the question
The current stock price of XYZ Ltd. is Rs. 30. At an exercise price of Rs. 30, put option on XYZ is priced at Rs. 2.15
each and the call options are priced at Rs. 2.89 each. Each contract consists of 100 options. What is the maximum
profit if you buy a call? [ 2 Marks ]
(a) Rs. 3289

Q2
(b) Unlimited
(c) Rs. 2711
(d) Rs. 3000
The intrinsic value of a put option is the maximum of _____. [ 2 Marks ]
(a) (Spot Price - Strike Price), and zero

Q3 (b) (Strike Price - Spot Price), and zero
(c) (Strike Price - Spot Price - Premium), and zero
(d) (Spot Price - Strike Price - Premium), and zero
An investor Mr. B, sells 2 ATM Call Options, Buys 1 ITM call option and buys 1 OTM call option. The strategy is a ___
strategy. [ 2 Marks ]
(a) Bear spread

Q4 (b) Short Condor
(c) Long Call Butterfly
(d) Bull spread
There is a put option on a stock with a strike price of Rs. 35 trading at Rs. 2. What would be the price of the put
option with a strike price of Rs. 34? [ 1 Mark ]
(a) Less than Rs. 2

Q5 (b) Rs. 3
(c) Re. 1
(d) Rs. 2
The profitable area of the pay off profile in a Long Call Condor is wider than that of the ______. [ 2 Marks ]
(a) Long Call

Q6 (b) Long Put
(c) Long Call Butterfly
(d) Long Strangle
The lower breakeven point in a long straddle _____. [ 2 Marks ]
(a) Strike Price of Long Call - Net Premium Paid on put

Q7 (b) Strike Price of Long Call - Net Premium Paid on call
(c) Strike Price of Long Call + Net Premium Paid
(d) Strike Price of Long Call - Net Premium Paid
Compared to a long strangle the chances of loss in Long straddle are- [ 1 Mark ]
(a) more
Q8 (b) less
(c) they are equal
(d) None of the above
Given that at strike price = Rs. 50 Put Premium = Rs. 5, Call Premium = Rs. 2. If an investor is using a Long Straddle
Strategy, then his initial outflow would be- [ 1 Mark ]
(a) Rs. 2
Q9 (b) Rs. 5
(c) Rs. 7
(d) Rs. 4
Which of the following is false with regard to Long call butterfly spread position? [ 2 Marks ]
(a) The seller expects the market to move significantly in either direction
(b) The profit for the buyer would be the maximum when the market price is equal to the highest strike
Q10 price
(c) It is combination of vertical bullish and vertical bearish strategies
(d) The buyer expects the market to be more or less stable
Nifty is a 4600. To do a Short Strangle Mr. A should select which strike prices? [ 1 Mark ]
(a) Rs. 4550 Put and Rs. 4450 Put

Q11 (b) Rs. 4550 Call and Rs. 4450 Call
(c) Rs. 4450 Call and Rs. 4550 Put
(d) Rs. 4700 Call and Rs. 4500 Put
Mr. C sells 1 ITM Call Option (lower strike), buys 1 ITM Call Option (lower middle), buys 1 OTM Call Option (higher
middle), sells 1 OTM Call Option (higher strike). He has entered into a _____ strategy. [ 2 Marks ]
(a) short call condor

Q12 (b) long butterfly
(c) short strangle
(d) short butterfly
Suppose ABC Ltd. is trading at Rs. 4368 in June. An investor buys a Rs. 4200 call for Rs. 98 while shorting ABC Ltd..
The breakeven point is ____. [ 2 Marks ]
(a) Rs. 4270

Q13 (b) Rs. 4298
(c) Rs. 4466
(d) Rs. 4102
An investor Mr. X expects the price of a stock ABC Ltd. to increase. He Buys a Call and Sells a Put. The strategy he
has done is called as ____. [ 2 Marks ]
(a) Long Combo

Q14 (b) Short Straddle
(c) Bear Put Spread
(d) Long Straddle
When you are bullish about a stock you can do a _____. [ 2 Marks ]
(a) Bear Put Spread

Q15 (b) Buy Put
(c) Sell Call
(d) Long Combo
In a Synthetic Long Call strategy the investor is ___. [ 2 Marks ]
(a) neutral to bearish

Q16 (b) conservatively bullish
(c) bearish
(d) conservatively bearish
Nifty is at 3200. Mr. XYZ sells 2 ATM Nifty Call Options with a strike price of Rs. 3200 at a premium of Rs. 98 each,
buys 1 ITM Nifty Call Option with a strike price of Rs. 3100 at a premium of Rs. 141.55 and buys 1 OTM Nifty Call
Option with a strike price of Rs. 3300 at a premium of Rs. 64. The Net debit is _____. [ 1 Mark ]
(a) Rs. 9.55

Q17
(b) Rs. 11.75
(c) Rs. 9.75
(d) Rs. 10.75
The profit in a covered call strategy is _____. [ 3 Marks ]
(a) limited
Q18 (b) always more than in long stock position
(c) no risk
(d) unlimited
In a Short Call Butterfly there should be _____ distance between each strike. [ 2 Marks ]
(a) unequal
Q19 (b) equal
(c) any
(d) zero
Mr. XYZ is bullish on Nifty when it is at 4191.10. He sells a Put option with a strike price Rs. 4100 at a premium of Rs.
170.50 expiring on 31st July. If Nifty closes at 3400 at expiry Mr. XYZ's profit / loss will be ___. [ 1 Mark ]
(a) loss of Rs. 170.50

Q20 (b) loss of Rs. 529.50
(c) gain of Rs. 170.50
(d) gain of Rs. 529.50
Mr. XYZ sells a Nifty Put option with a strike price of Rs. 4000 at a premium of Rs. 21.45 and buys a further OTM Nifty
Put option with a strike price Rs. 3800 at a premium of Rs. 3.00 when the current Nifty is at 4191.10, with both
options expiring on 31st July. If on expiry the Nifty closes at 3600, what is the net pay-off for Mr. XYZ? [ 1 Mark ]
(a) gain of Rs. 18.45

Q21
(b) loss of Rs. 18.45
(c) loss of Rs. 181.55
(d) gain of Rs. 181.55
A _____________ is created by going short on both put and call options, and the strike price and time to expiration
of both the options are same. [ 1 Mark ]
(a) Synthetic put

Q22 (b) long Strangle
(c) Short straddle
(d) Long straddle
The net effect of this strategy is to bring down the cost and raise the breakeven on buying a Put (Long Put). [ 2
Marks ]
(a) Long Condor

Q23 (b) Bear Put Spread
(c) Bull Put Spread
(d) Short Condor
Mr. A buys a call with strike price of Rs.100 for Rs. 3 and sells a call with strike price of Rs. 90 for the same month for
Rs. 6. The maximum possible loss in the strategy is __. [ 2 Marks ]
(a) Rs. 9
Q24 (b) Rs. 7
(c) Rs. 8
(d) Rs. 10
A moderately bearish investor will enter into a ______ strategy. [ 2 Marks ]
(a) Buy Call

Q25 (b) Covered Put
(c) Long Straddle
(d) Sell Put
In a Bull Call Spread if the stock price rises to the higher (sold) strike, the investor makes the ____. [ 2 Marks ]
(a) maximum loss

Q26 (b) maximum loss which is equal to the strike price
(c) maximum profit which is equal to the strike price
(d) maximum profit
Mr. XYZ sells a Nifty ITM call option with strike price of Rs. 2600 at a premium of Rs. 154 and buys a Nifty OTM call
option with strike price Rs. 2800 at a premium of Rs. 49. If on expiry the Nifty closes at 3200, the net pay-off for Mr.
XYZ is ___? [ 1 Mark ]
(a) loss of Rs. 95

Q27
(b) profit of Rs. 105
(c) profit of Rs. 95
(d) loss of Rs. 105
A stock ABC Ltd. is trading at Rs. 450. Mr. XYZ is bullish on the stock. He sells a Put option with a strike price Rs. 400
at a premium of Rs. 1.00 and buys a Call Option with a strike price of Rs. 500 at a premium of Rs. 2. If the stock
closes at Rs. 600, his net payoff is ___. [ 1 Mark ]
(a) Rs. 299

Q28
(b) Rs. 99
(c) Rs. 199
(d) Rs. 399
A Short Call Condor is suitable for ____ markets. [ 2 Marks ]
(a) bullish only markets

Q29 (b) highly volatile markets
(c) low volatility markets
(d) bearish only markets
Mr. X buys a put with strike price of Rs. 114 for Rs. 7 and sells a put with strike price of Rs. 110 for the same month
for Rs. 5. If at expiry, stock closes at 100, what is profit/loss for the strategy? [ 2 Marks ]
(a) Rs. -2 (loss)

Q30 (b) Rs. 2 (profit)
(c) Rs. 5 (profit)
(d) Rs. -5 (loss)
Bull call spreads can be implemented by buying an _____________ option , while simultaneously writing a higher
strike _______________ option of the same underlying security and the same expiration month. [ 2 Marks ]
(a) out- of the money, at the money

Q31 (b) in-the money, out-of-the money
(c) out- of the money, out-of the money
(d) out-of the money, in- the money
Nifty is presently at 2694. Mr. XYZ buys one Nifty ITM Put with a strike price Rs. 2800 at a premium of Rs. 132 and
sells one Nifty OTM Put with strike price Rs. 2600 at a premium Rs. 52. If on expiry of the options the Nifty closes at
2200, then the net pay-off for Mr. XYZ is ___. [ 1 Mark ]
(a) 0
Q32
(b) Rs. 80
(c) Rs. 20
(d) Rs. 120
Nifty is at 3200. Mr. XYZ buys 2 ATM Nifty Call Options with a strike price of Rs. 3200 at a premium of Rs. 97.90 each,
sells 1 ITM Nifty Call Option with a strike price of Rs. 3100 at a premium of Rs. 141.55 and sells 1 OTM Nifty Call
Option with a strike price of Rs. 3300 at a premium of Rs. 64. On expiry of the options Nifty closes at 3600. The net
payoff for Mr. XYZ is ____. [ 1 Mark ]
Q33 (a) Rs. 29.75

(b) Rs. 9.75
(c) Rs. 19.75
(d) Rs. 10.75
Suppose ABC Ltd. is trading at Rs. 4500 in June. An investor, Mr. A, shorts Rs. 4300 Put by selling a July Put for Rs. 24
while shorting an ABC Ltd. stock at Rs. 4500. If ABC Ltd. closes at Rs. 4400 on expiry of the options, the net payoff
for Mr. A is ____. [ 1 Mark ]
(a) Rs. 124

Q34
(b) Rs. 244
(c) Rs. 224
(d) Rs. 234
Covered Call payoff diagram has same shape as payoff diagram of a _____. [ 2 Marks ]
(a) Long put

Q35 (b) Protective put
(c) Short Call
(d) Short put
The seller of a call option does not expect: [ 2 Marks ]
(a) Bearishness in the markets

Q36 (b) Downside volatility in the price of the underlying asset
(c) Decrease in the price of underlying asset
(d) Increase in the price of the underlying asset
Suppose an investor Mr. A buys ABC Ltd. for Rs. 4758. He writes a Call of strike price Rs. 5000 for Rs. 39 while
simultaneously purchasing a Rs. 4700 strike price Put for Rs. 27. At expiry of the options the stock closes at Rs. 5100.
The Net payoff for Mr. A is ___. [ 1 Mark ]
(a) + Rs. 265

Q37
(b) + Rs. 235
(c) + Rs. 250
(d) + Rs. 254
Suppose Nifty is at 4351 in May. An investor executes a long strangle by buying a June Rs. 4300 put for Rs. 123 and a
June Rs. 5850 call for Rs. 85. The net debit taken to enter the trade is ____. [ 2 Marks ]
(a) Rs. 208

Q38 (b) Rs. 85
(c) Rs. 38
(d) Rs. 123
A Long Straddle is a ____ strategy. [ 2 Marks ]
(a) volatile
Q39 (b) bullish
(c) bearish
(d) neither bullish nor bearish
Nifty is at 3600. Mr. XYZ sells 1 ITM Nifty Call Option with a strike price of Rs. 3400 at a premium of Rs. 41.25, buys 1
ITM Nifty Call Option with a strike price of Rs. 3500 at a premium of Rs. 26, buys 1 OTM Nifty Call Option with a
strike price of Rs. 3700 at a premium of Rs. 9.80 and sells 1 OTM Nifty Call Option with a strike price of Rs. 3800 at a
premium of Rs. 6.00. On expiry of the options if Nifty closes at 3100, the net pay-off for Mr. XYZ is ____. [ 1 Mark ]
Q40 (a) Rs. - 11.45 (loss)

(b) Rs. 88.55 (profit)
(c) Rs. -88.55 (loss)
(d) Rs. 11.45 (profit)
The losses in a synthetic long call are ____. [ 1 Mark ]
(a) limited
Q41 (b) depends on the strike price
(c) depends on the premium
(d) unlimited
An investor adopts a short straddle at a strike price of Rs. 49, premium for call being Rs. 2.30 and put being Rs. 3.50.
the maximum gain would be: [ 2 Marks ]
(a) Rs. 2.30

Q42 (b) Rs. 3.50
(c) Rs. 1.20
(d) Rs. 5.80
Mr. M buys 1 ITM Call (lower strike), sells 1 ITM Call (lower middle), sells 1 OTM Call (higher middle) and buys 1 OTM
Call (higher strike). He has entered into a _____ strategy. [ 2 Marks ]
(a) long strangle

Q43 (b) long call Condor
(c) long butterfly
(d) short butterfly
A Short Strangle is a slight modification to the _____. [ 2 Marks ]
(a) A Long Strangle

Q44 (b) A Long Condor
(c) A Long Butterfly spread
(d) Short Straddle
What is the reason for investors to opt for a long strangle strategy instead of a long straddle strategy? [ 2 Marks ]
(a) its safer

Q45 (b) it gives a higher return
(c) the premium paid is lower
(d) the premium received is higher
Suppose ABC Ltd. is trading at Rs. 4457 in June. An investor Mr. A buys a Rs. 4500 call for Rs. 100 while shorting the
stock at Rs. 4457. If ABC Ltd. closes at Rs. 4100 on expiry of the options contract, the net payoff for the investor is
Rs. _____. [ 1 Mark ]
(a) Rs. 357

Q46
(b) Rs. 557
(c) Rs. 457
(d) Rs. 257
The profit in a collar strategy is ____. [ 2 Marks ]
(a) limited
Q47 (b) unlimited
(c) limited to premium received on the call
(d) limited to premium received on the put
Nifty is at 3600. Mr. XYZ buys 1 ITM Nifty Call Option with a strike price of Rs. 3400 at a premium of Rs. 41.25, sells 1
ITM Nifty Call Option with a strike price of Rs. 3500 at a premium of Rs. 26, sells 1 OTM Nifty Call Option with a
strike price of Rs. 3700 at a premium of Rs. 9.80 and buys 1 OTM Nifty Call Option with a strike price of Rs. 3800 at a
premium of Rs. 6.00. On expiry of the options if Nifty closes at 3200, the net pay-off for Mr. XYZ is ____. [ 1 Mark ]
Q48 (a) Rs. -88.55 (loss)

(b) Rs. -11.45 (loss)
(c) Rs. 11.45 (profit)
(d) Rs. 88.55 (profit)
Which strategy involves writing a call and put option at different strike price but same maturity ____. [ 2 Marks ]
(a) short straddle

Q49 (b) long straddle
(c) long strangle
(d) short strangle
Mr. X buys a put with strike price of Rs. 100 for Rs. 5 and sells a put with strike price of Rs. 108 for the same month
for Rs. 10. The maximum possible gain in the strategy is ___. [ 2 Marks ]
(a) Rs. 7
Q50 (b) Rs. 8
(c) Rs. 5
(d) Rs. 6
Mr. XYZ buys 2 ATM call options, sells 1 ITM call option and sells 1 OTM call option. He has entered into a _____
(a) Short straddle

Q51 (b) Long Call Butterfly
(c) Short Strangle
(d) Short Call Butterfly
Which of the following options strategy is not a bullish strategy? [ 1 Mark ]
(a) Buying a Futures contract on the Stock

Q52 (b) Buying a call option
(c) Writing a put option
(d) Writing a call option
An investor sells a stock and sells a put on the stock. He has done a _____. [ 2 Marks ]
(a) Long Strangle

Q53 (b) Short Straddle
(c) Long Straddle
(d) Covered Put
Mr. A buys a call with strike price of Rs. 99 for Rs. 6 and sells a call with strike price of Rs. 105 for the same month
for Rs. 3. If at expiry,stock closes at 105, what is the profit/loss for the strategy? [ 1 Mark ]
(a) Rs. -3 (loss)

Q54 (b) Rs. -6 (loss)
(c) Rs. 3 (profit)
(d) Rs. 6 (profit)
In case of Bull Put Spread Maximum Profit is achieved when ____. [ 2 Marks ]
(a) Price of Underlying < Strike Price of Short Put

Q55 (b) Price of Underlying <= Strike Price of Short Put
(c) Price of Underlying > Strike Price of Short Put
(d) Price of Underlying >= Strike Price of Short Put
Mr. D Buys a Stock, Buys a Put and Sells a Call on the stock. This strategy is ____. [ 2 Marks ]
(a) a long straddle

Q56 (b) a long butterfly
(c) a long strangle
(d) a collar
Suppose a June call option on a stock X is currently trading at Rs. 31 with a strike price Rs. 35. On the expiration
date the price of the stock is Rs. 32. Then, which of the following is correct ? [ 1 Mark ]
(a) Option is in-the-money

Q57 (b) Pay off is Rs. 3
(c) Option is out -of- money
(d) Option is at-the-money
Mr. XYZ shorts a stock PQR Ltd. and buys Call options on PQR Ltd. for an equal amount. He has created a _______
(a) Long Straddle

Q58 (b) Protective Call
(c) Long strangle
(d) Short Straddle
Mr. Ramesh is adopting a Bear Call spread strategy using call options on a stock having the strike prices of Rs. 150
and Rs.125, priced at Rs. 7 and Rs. 20 respectively. At what price of the stock during the expiration, would he break
even ? [ 2 Marks ]
(a) Rs. 137

Q59
(b) Rs. 130
(c) Rs. 132
(d) Rs. 138
Which of the following statements about a covered call writing strategy is true? [ 2 Marks ]
(a) Rewards are unlimited

Q60 (b) Break even is Stock Price paid + Premium received
(c) It is a bearish strategy
(d) Rewards are limited
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NCFM Model Test Paper

Options Trading Strategies Module

(a) Rs. 3289

(a) (Spot Price - Strike Price), and zero

(a) Bear spread

(a) Less than Rs. 2

(a) Long Call

(a) Strike Price of Long Call - Net Premium Paid on put

(a) Rs. 4550 Put and Rs. 4450 Put

(a) short call condor

(a) Rs. 4270

(a) Long Combo

(a) Bear Put Spread

(a) neutral to bearish

(a) Rs. 9.55

(a) loss of Rs. 170.50

(a) gain of Rs. 18.45

(a) Synthetic put

(a) Long Condor

(a) Buy Call

(a) maximum loss

(a) loss of Rs. 95

(a) Rs. 299

(a) bullish only markets

(a) Rs. -2 (loss)

(a) out- of the money, at the money

Q33 (a) Rs. 29.75

(a) Rs. 124

(a) Long put

(a) Bearishness in the markets

(a) + Rs. 265

(a) Rs. 208

Q40 (a) Rs. - 11.45 (loss)

(a) Rs. 2.30

(a) long strangle

(a) A Long Strangle

(a) its safer

(a) Rs. 357

Q48 (a) Rs. -88.55 (loss)

(a) short straddle

(a) Short straddle

(a) Buying a Futures contract on the Stock

(a) Long Strangle

(a) Rs. -3 (loss)

(a) Price of Underlying < Strike Price of Short Put

(a) a long straddle

(a) Option is in-the-money

(a) Long Straddle

(a) Rs. 137

(a) Rewards are unlimited

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