Let’s go with an example, to understand better how profits and losses are calculated in . The lot size of is 50 in number irrespective of . The profit/loss does not depend on the type of call (nifty or nifty ), expiry or strike. It directly depends only on which trader selects while purchasing the option.
For instance, if 1 lot of 5600 is bought at 88. The investment required to purchasethis option is approximately Rs.4400 (50 x 88 = 4400) leaving brokerage and other costs. If the same option is sold at 120, the profit in terms of points is around 32 (120-88). Now its pretty simple that multiplying the number of shares with the difference premium (32) gives us the profit (50 x 32= Rs.1600) per 1 lot. Exact calculation goes with the PUT option too as even in case of nifty put, same kind buying takes place.
Coming to the loss side, the maximum loss one can get with the above put option is Rs.4400 as that is the maximum loss trader agreed to spare at the time of buying. So even if nifty collapses huge in the other direction of your nifty call or nifty put, the maximum loss is limited. This is the area where stands special when compared to other types of trading.