A speculator has purchased United States dollar put options, with an exercise price of A$1.30 and a premium of A$0.05 per unit. (a) Calculate the break-even price. (b) Calculate the profit or loss of the option for the speculator if the spot rate at the time the speculator considers exercising the options is : (1) A$1.20 (2) A$1.28 (3) A$1.34. (c) What is the maximum profit and maximum loss for the speculator?
Q: An investor has purchased United States dollar call options, with an exercise price of A$1.15 and a…
A: Call option is a derivative instruments which gives its buyer a right to buy an asset at pre…
Q: You purchased a put option on Australian dollars for RM0.02 per unit. The strike price was RM4.25,…
A: A buyer of put option expects the spot price to be below the strike price. The buyer of put option…
Q: Assume that Mr. Binda is a speculator who buys a 90-day British pound option with a strike price of…
A: Call Options gives the right but not the obligation to the buyer the option to buy a bond, stock,…
Q: Emmanuella purchased a put option on British pounds for $.06 per unit. The strike price was $1.85,…
A: given, put = $0.06 per unit k = $1.85 s= $1.69 units = 31250
Q: The table below provides the premiums for one-year European options on an underlying asset with a…
A: Current Spot Price is 130 To Create: A butterfly spread using: 120-140 strangle ATM Straddle To…
Q: Use the European option pricing formula to find the value of a six-month call option on Japanese…
A: When valuing a european call option exchange rate the formula to determine the same is:…
Q: The risk-fee rate is 5% per period and a (non- income paying) security has a current price of £300.…
A: A type of derivative in the financial market that provides its holder, the right to sell the…
Q: Consider a European put option with exercise price 50 Euro and expiration date 3 months ahead. The…
A: Options: Options give the holder the right, but not the obligation to purchase or sell the…
Q: 2. These options are traded in the market: call option with an Exercise (Strike) Price of 1.15 $/€…
A: Strike price is 1.15 $/∈ Premium of Call option is 0.03 $ per Euro Spot price is 1.17 $/∈ To Find:…
Q: An Australian company imports goods from Germany and expects the payment of EUR 250,000 after 60…
A: Call option is a type of option contracts where buyer of call contract is given privilege. The buyer…
Q: Mike sold a put option on British pounds for $.04 per unit. The exercise price was $1.70, and the…
A: Per unit net profit on option = Option premium + ( Spot price - Exercise price ), if the spot price…
Q: A put option on Australian dollars with a strike price of $.80 is purchased by a speculator for a…
A: Put option strike price = 0.8 Premium = 0.2 A dollar spot price = 0.74
Q: A) Assume you are an exporter and you want to sell USD that you have received as export remittance.…
A: Part (A): Answer: The exchange rate of 1 USD is INR 1/65.12 - INR 1/65.10 Calculation of exchange…
Q: A U.S. investor will receive dividend from a Sri Lankan coconut exporting company but worries about…
A: Foreign exchange- Foreign exchange is the conversion of one currency into another at a specific rate…
Q: Assume that the Japanese yen is trading at a spot price of 92.04 cents per 100 yen. Further assume…
A: Intrinsic value is the value that helps in measuring the profitability of an option contract based…
Q: Consider the following data (interest rate is per period): S = 100; K = 75;R= 1.20; u = 1.5; d = .5.…
A: (1). Two Period Binomial Modal: (a). Binomial Price of European call option (2 Periods) Stock Price…
Q: You have entered in a put option contract on British pound at a price of $0.04 per British pound.…
A: Put option contract means where we buy an option to sell something . It is our right to sell and not…
Q: Assume that the Japanese yen is trading at a spot price of 92.04 cents per 100 yen. Further assume…
A: Time value refers to the value of money or share at different point of time. The concept of time…
Q: You have entered in a put option contract on British pound at a price of $0.04 per British pound.…
A: Put option contract is a kind of financial derivative contract in which the owner of the contract…
Q: e is a European call option on the dollar with strike price of Kc = 94 pence per dollar and a…
A: The call option gives opportunity to buy the stock on expiration but no obligations to do that and…
Q: Assume that the price of a forward contract is 127.87. The European options on the forward contract…
A: To Find: Price of put option
Q: Assume that Smith Corporation will need to purchase 200,000 British pounds in 90 days. A call option…
A: Option: An option is a special type of contract which gives its holder the right but not obligation…
Q: Assume that the price of a forward contract is 127.87. The European options on the forward contract…
A: To Find: Price of put option
Q: i) Abdul sold a call option on British pounds for $.05 per unit. The exercise price was $1.80, and…
A: Given : call option on British pounds for $.05 per unit. The exercise price was $1.80, the spot…
Q: Assume that call currency option enable to buy of dollar for Shs. 50.00 while it is quoted at Shs.…
A: Step 1 The difference between the underlying stock's price and the strike price is the intrinsic…
Q: Mr. Saso holds a European put option with a strike price off $1.30/€ and a premium of $0.05/€. At…
A: Answer: The correct answer is option (A) Introduction: A European option provides an investor a…
Q: Consider the position of a call writer who sold a call option on Australian dollars at an exercise…
A: Given, Exercise price = $US0.7600/$A Exercise date = $US0.7475/$A, $US0.7550/$A, $US0.7600/$A,…
Q: Mike purchased a put option on British pounds for $.04 per unit. The exercise price was $1.70, and…
A: Purchase Price of a put option on British pounds =$.04 per unit The exercise price = $1.70, The spot…
Q: a. Should Cachita buy a put on yen or a call on yen? b. What is Cachita's breakeven price on the…
A: Put Option: A put option allows the buyer of the option the right and not the obligation to sell…
Q: Consider the position of a call writer who sold a call option on Australian dollars at an exercise…
A: For a writer of a call option, The Payoff will be, = - Maximum of ( 0 or S - K) ; S =…
Q: A call option gives the option holder the right to sell an asset at a fixed price during a…
A: Call option is a right to to buy an asset at a specified price, whereas a put option gives the…
Q: ean put and call options both have an exercise price of GH¢50 that expires in 120 days. The…
A: Call give the right to purchase the equity on the expiration but no obligation there to do that.
Q: Tyson Inc. has an account payable in Swedish krona due in 60 days. Which would be an appropriate…
A: To hedge the amount payable in 60 days, the company shall enter int a call option of buying the…
Q: ium of $US0.002/$A. Calculate and graphically depict the profits/losses for this call option…
A: Payoff to call option seller: If Market price <= Strike price (or Exercise price) , then payoff =…
Q: A speculator has purchased United States dollar put options, with an exercise price of A$1.30 and a…
A: Put Options are exchange traded contracts where an investor can acquire rights for selling its share…
Q: Andrea is an option speculator. She anticipates the Canadian dollar to depreciate from its current…
A: Given: Current USD/CAD exchange rate 0.90 USD/CAD Andrea's anticipation Depreciate from…
Q: ABC Inc., purchased 75,000 units call option on British pounds for $.021 per unit. The strike…
A: Answer - Calculation of Profit per unit on exercising the option - Exercise Price - $…
Q: An investor has purchased United States dollar call options, with an exercise price of A$1.15 and a…
A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: Choose all expressions that accurately complete the statement below: Writing a European call…
A: Options are referred as the derivative based financial instruments which indicates the value of an…
Q: Petra is an option writer of Australian dollar (A$) options. In anticipation of an appreciation of…
A: The PE seller is writing the option. It means the individual would receive the premium and it would…
Q: Doctor Dumpkins is bullish on the British pound so he sells a one-month put for $0.03. The strike…
A: In a financial market, a put option is a trading strategy that gives a right to its owner to sell…
Q: Your options trading strategy involves buying a European put with a strike price of ₺10 for ₺0.50…
A: Strategy: Buying put with strike price 10 for 0.5 Buying call with strike price 25 @0.75 Selling…
Q: Malibu, Inc., is a U.S. company that imports British goods. It plans to use call options to hedge…
A: A company can hedge its exposure to foreign exchange currency risk by entering into derivatives…
A speculator has purchased United States dollar put options, with an exercise price of A$1.30
and a premium of A$0.05 per unit.
(a) Calculate the break-even price.
(b) Calculate the profit or loss of the option for the speculator if the spot rate at the time the speculator considers exercising the options is : (1) A$1.20 (2) A$1.28 (3) A$1.34.
(c) What is the maximum profit and maximum loss for the speculator?
Step by step
Solved in 5 steps with 2 images
- An investor has purchased United States dollar call options, with an exercise price of A$1.15 anda premium of A$0.03 per unit.(a) Calculate the break-even price. (b) Calculate the profit or loss of the option for the investor if the spot rate at the time the investor considers exercising the options is : (1) A$1.10 (2) A$1.17 (3) A$1.23.(c) What is the maximum loss for the investor?(d) Explain why the investor could have an unlimited profit if the options are exercised.(e) Explain in general the similarities of and differences between a currency call option and a currency put option.Consider the position of a call writer who sold a call option on Australian dollars at an exercise price of $US0.7600/$A, and a premium of $US0.002/$A. Calculate and graphically depict the profits/losses for this call option position for the following spot prices at exercise date: $US0.7475/$A, $US0.7550/$A, $US0.7600/$A, $US0.7700/$A, and $US0.7800/$A.Consider the position of a call writer who sold a call option on Australian dollars at an exercise price of $US0.7600/$A, and a premium of $US0.002/$A. Calculate and graphically depict (excel) the profits/losses for this call option position for the following spot prices at exercise date: $US0.7475/$A, $US0.7550/$A, $US0.7600/$A, $US0.7700/$A, and $US0.7800/$A.
- You have entered in a put option contract on British pound at a price of $0.04 per British pound. When the option was exercised the dollar was selling of 0.63 British pound. Compute your net profit from the option if the exercise price was $1.80 and size of option is 50,000. a. $8,634. b. Pound 8,634. c. $56,5 d. Pound 56,5 00009292d 56,500Consider the position of a call writer who sold a call option on Australian dollars at an exercise price of $US0.7600/$A, and a premium of $US0.002/$A. Calculate and graphically depict the profits/losses for this call option position for the following spot prices at exercise date: $US0.7475/$A, $US0.7550/$A, $US0.7600/$A, $US0.7700/$A, and $US0.7800/$A. Please explain it in Excel. thank youYou purchased a put option on Australian dollars for RM0.02 per unit. The strike price was RM4.25, and the spot rate at the time the option was exercised was RM4.38. Assuming that there are 13,830 units in the Australian dollar option.Would you exercise the option? What will your net profit on the put option?
- Andrea is an option speculator. She anticipates the Canadian dollar to depreciate from its current level of 0.90 USD/CAD to 0.85 USD/CAD. Currently, Canadian dollar call options are available with an exercise price of 0.91 USD/CAD and a premium of $0.02. Also, Canadian dollar put options are available with an exercise price of 0.88 USD/CAD and a premium of $0.02. If the future spot rate of the Canadian dollar is 0.85 USD/CAD, what is Andrea's net profit or loss per unit?A trader focuses principally on the Australian Dollar/Singapore Dollar (A$/S$) cross-rate. The current spot rate is S$0.9/A$. The trader expects after 2 months the cross rate will be S$0.79/A$. The trader plans to purchase an option, and has the following choices: A CALL option on S$ has a strike price of S$0.85/A$ and a premium of A$0.00037/S$. A PUT option on S$ has a strike price of S$0.85/A$ and a premium of A$0.00048/S$. i. Determine if the trader should buy a PUT option or a CALL option on S$. ii. If the trader buys the option decided in (i), determine net profit for the trader if the spot rate after 2 months is as the trader expects. iii. If the spot rate after 2 months is not what the trader expected and is S$0.61/A$, will the option the trader buys be at-the-money, or in-the-money, or out-of-the-money? [[Notably, the trader is purchasing option on S$ -- meaning S$ is the foreign currency in this instance]]Assume that the Japanese yen is trading at a spot price of 92.04 cents per 100 yen. Further assume that the premium of an American call (put) option with a striking price of 93 is 2.10 (2.20) cents. Calculate the intrinsic value and the time value of the call and put options. (A Negative value should be indicated with a minus sign. Do not round intermediate calculations. Enter your answers in cents per 100 yen. Round your answers to 2 decimal places.)
- Sysco corporation has purchased currency call options to hedge a 4,320,000 Swedish krona payable. The premium is $0.015 (per unit of Swedish krona) and the exercise price of the option is $0.097 per Swedish krona. If the spot rate at the time of maturity is S0.105 per Swedish krona, what is the total amount paid by the corporation if it acts rationally (after accounting for the premium paid)? Question 27 options: S 419,040. $354,240. $518,400. S453,600. $483,840.An investor buys a European call option at a price of 7.6 yuan. The stock price is 52 yuan and the strike price is 55 yuan. Under what circumstances will the investor make a profit ? Under what circumstances will the option be executed ? Draw a diagram of the relationship between investor profitability and stock price at maturity.Suppose that a European call option to buy a share for $100.00 costs $5.00 and is held untilmaturity. Under what circumstances will the holder of the option make a profit? Underwhat circumstances will the option be exercised? Draw a diagram illustrating how the profitfrom a long position in the option depends on the stock price at maturity of the option. Suppose that a European put option to sell a share for $60 costs $8 and is held untilmaturity. Under what circumstances will the seller of the option (the party with the shortposition) make a profit? Under what circumstances will the option be exercised? Draw adiagram illustrating how the profit from a short position in the option depends on thestock price at maturity of the option.