Currency Options Inclass Problem sol

Currency Options Inclass Problem sol - 81 NOV Call OUT...

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In Class Assignment # 2: Currency Options Please refer to the attached quotes on Swiss franc currency options. 1. For each option, indicate if it is in-the-money or out-of-the-money and calculate the price of one contract. Assume that the current spot price for SF is $0.7915.: SF Currency Options In/out of the money Price of buying one contract 79 NOV Call: IN 0.0147 x 62,500 = $918.70 79 DEC Put OUT 0.0071 x 62,500 = $443.70
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Unformatted text preview: 81 NOV Call OUT 0.0053 x 62,500 = $331.25 81 DEC Put IN 0.0167 x 62,500 = $1,043.00 2. If on the option expiration date, the spot price for SF is $0.7915, calculate the net profit/loss from buying: (i) One 81 NOV Call contract: Do not exercise, because X > S, loss = - $331.25 (ii) One 81 DEC Put contract: Exercise, because X>S: profit = [0.81 - 0.7915 - 0.0167]*62,500 = $112.00...
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This note was uploaded on 04/15/2011 for the course FINA 5500 taught by Professor Staff during the Spring '08 term at North Texas.

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