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Sell Call Vs Buy Put
AFM
answered on 26-Apr-26 20:24
Sir, when an investor expects bullish market, he can either sell call for limited profit or buy put for unlimited profit. So it is always better for buying put option, so when will the investor goes for sell call? Does premium plays a role here?
latest answer
Firstly sell call or buy put are done in bearish market. Decision for a speculator to chose which one depends on a lot of factors In buy put there is no downside but premium outflow In sell call there is premium inflow and quite a bit of downside possibility if market becomes bullish It is not just premium, it also considers expected bearishness,time period, liquidity and price of options available
SANJITHA
CA Final
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72
Present Value
AFM
answered on 25-Apr-26 17:10
Sir, while calculating future price after reduction in the share price, whether any adjustment to be done on the carrying cost as some duration has elapsed. [Video Time Stamp: 05:04]
latest answer
We are assuming change is happening on day zero and hence no change to cost of carry
SANJITHA
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107
Illustration 46
AFM
answered on 24-Apr-26 20:11
Sir what is mean by term structure of interest rate will remain the same and why we can’t use the existing YTM ie 11% and 12 % to compute the price at end of year one [Video Time Stamp: 11:07]
latest answer
Term structure
Mhd Mmp
CA Final
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85
Two methods followed in same kind of problems (Security valuation)
AFM
answered on 24-Apr-26 17:12
In Security valuation chapter, for same kind of problem 2 kinds of solution were done. Now its confusing which to follow. See in photos attached in problem 28 we did calculate the final value at 9th year because it changed to constant growth rate from 8th year, where as in problem 39 we calculated in 8th year itself where it changed to constant growth rate from that year only. So, what is the correct method? Should we need to do growth rate on 8th year or 9th year. Please clarify as soon as possible
latest answer
No worries
Sasi Sekhar
CA Final
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110
upfront fees
AFM
answered on 24-Apr-26 16:16
can we take 5 year because from may 19 till now icai ans may change ? if asked same question [Video Time Stamp: 29:12]
latest answer
I am not aware of any such question in last few years w.r.t Upfront fees in ECB in IRRM chapter where they could have changed the solution If you are aware let me know I would continue to use May 19 Suggested answer method, till they come up with a revised solution in latest RTP / MTP / SA/ ICAI SM
Vinod Kumawat
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144
Illustration 37
AFM
answered on 24-Apr-26 16:04
Sir can I use the equation first year 1+s1=1+f1 Second year =(1+s2)^2 =(1+f1)(1+f2) like this in each year here s will be YTM [Video Time Stamp: 08:45]
latest answer
Yes the number Will and should match this way too But pls note forward rates are derived from spot rates and not the other way around
Mhd Mmp
CA Final
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88
Buy at spot
AFM
answered on 24-Apr-26 13:11
Sir, when the theoretical future price is lower than actual future price, the strategy is to buy at spot and sell future. Why do we always borrow to buy stock rather than using own fund? [Video Time Stamp: 22:00]
latest answer
In derivatives u assume we don’t have cash lying around Even if u have cash lying around there is an opportunity cost So we have to consider borrowing cost even if it is our own cash
SANJITHA
CA Final
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143
Hedging
AFM
answered on 23-Apr-26 07:23
Sir, it is mentioned that hedging is to offset price risk in cash market by taking an equal but opposite position in the future market. But to buy dollars in cash market after some period, I will enter into buy future today, so both buy position in cash and future market, how is it the opposite position? [Video Time Stamp: 18:56]
latest answer
Hedging On due date you cancel the future and buy on cash Net price in cash market will be actual price plus / minus gain or loss in future market Opposite position is take.n when u have a portfolio andi seek to hedge it If u are already long on a stock and have plans to sell it on a future date u will sell a future contract now ie short Long and short are opposite U do in future market what u seek to do in cash market
SANJITHA
CA Final
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94
Delivery of stock
AFM
answered on 21-Sep-26 16:25
Sir, in the arbitrage scenario, at maturity are we delivering the stock to settle the future contract? Can it be also 2 separate transactions where stock is sold in the market at expiry date and future contract is closed on net cash settlement. [Video Time Stamp: 08:49]
latest answer
In cash segment Only intra day net cash settlement Futures always net cash settlement whether stock or index
SANJITHA
CA Final
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106
MTP 2 May 26
AFM
answered on 21-Apr-26 19:03
In sub question 3, how did they decided that add 13 and reduce 3.5 and what is the logic behind this
latest answer
The reasoning they gave is that 3.5 year duration bond has too small a duration. Also it has a very high coupon so price impact of yield reduction will be very minimal hence they chose the next bond. Honestly am not sure how and why they come up with such questions and explanations 🤦 I
Hrishikesh Pradhan
Qualified CA
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157