American Express sells a call option on euros (contract size is €500,000) at a premium of $0.04 per euro. If the exercise price is $0.91 and the spot price of the euro at date of expiration is $0.93, what is American express’s profit or loss on this call option?
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American Express sells a call option on euros (contract size is €500,000) at a premium of $0.04 per euro. If the exercise price is $0.91 and the spot price of the euro at date of expiration is $0.93, what is American express’s profit or loss on this call option?
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- Suppose a German importer owes an Australian exporting company 150,000 AUD, due in three months. S_0 (EUR/AUD) 0.60 Se (EUR/AUD) 0.50 (0.3) and 0.65 (0.7) Premium on AUD call option R = EUR0.02 Exercise exchange rate E = 0.62 Time to expiry 3 months What is the expected value of payables in AUD under hedge Will the option to hedge be undertaken on the basis of expected spot rate? Explain.For a call option of CN¥100,000 with the $0.16 exercise price and $0.0005 premium, When the spot exchange rate is $0.1602, the cost associated with not exercising the call (in total) is US$A European put option contract with an exercise price of $1.65 per pound and a contract size of £32,000 is currently trading at a premium of $0.18 per pound. Required: a-1. If you buy this contract, what spot exchange rate at maturity will maximize your profit? a-2. If you buy this contract, what is the amount of the maximum possible profit from one contract? b. If you buy this contract, what is your maximum possible loss from one contract? c. If you sell this contract, what is your maximum possible profit on this contract? d-1. If you sell this contract, what is your maximum possible loss from one contract? d-2. At what future spot exchange rate will you maximize your loss? e. At what future spot exchange rate, will either the buyer or seller of this contract break even?
- You trade in two types of options. First, you purchase 7 call option contracts on the Euro with an exercise price of 1.25. Second, you sell 8 put option contracts on the Euro with an exercise price of 1.22. The fees/prices on the contracts are $.04 (calls) and $.03 (puts). Forward Rates for the Euro are 1.210-11 $/E. If contract sizes for Euros are 125,000 options per contract and the final price of Euros is 1.40. $/E, how much profit/loss have you made from participation in options?UCD (U.S. based MNC) will receive 250,000 euros in one year. The spot exchange rate today is $1.20 per euro. It observes that1. The one-year interest rate for euros is 8%, and the one-year interest rate for U.S. dollars is 3%.2. In the option market, there is one-year call option or put option available. Both options have the same exercise price of $1.18 per euro, and a premium of $0.02 per euro.3. In the forward market, the one-year forward rate exhibits a 5% discount from the current spot exchange rate. How should UCD utilize the forward market to hedge the exchange rate risk for its future receivables? And what shall be the amount received based on this hedging strategy? (Note: UCD can only buy or sell the forward contract at the forward rate available in the forward market described in bullet 3.)A call option allows the holder to buy USD100,000 at an exercise exchange rate of 1.8000 (AUD/USD). If the premium paid is 0.005 Australian cents for each USD, calculate the net payoff at the following spot exchange rates: (a) 1.8020 (2.5 marks); (b) 1.8360 (2.5 marks); and (c) 1.7970 (2.5 marks). At what exchange rate will the holder break even?
- The size of the peso contract is MXP500, 000, and the euro contract is on EUR125, 000. How much would be the gain of loss on MXP500, 000 unit contract and on EUR125, 000 unit contract if the change in the price of the currency unit is USD0.0001?The size of the peso contract is MXP500, 000, and the euro contract is on EUR125, 000. How much would be the gain of loss on MXP500, 000 unit contract and on EUR125, 000 unit contract if the change in the price of the currency unit is USD0.0001? Complete Solution.Compute for the gain or loss from the derivative contract. And Show Complete solution. The call option has a strike price of P50 per 1 USD. On exercise date, the exchange rate is P48.
- i sold a call option with an exercise price of $1.20/euro. the premium was $0.02/euro. what is my profit or loss if the exchange rate is $1.18/euro?Assume that Smith Corporation will need to purchase 200,000 British pounds in 90 days. A call option exists on British pounds with an exercise price of $1.68, a 90-day expiration date, and a premium of $.04. A put option exists on British pounds, with an exercise price of $1.69, a 90-day expiration date, and a premium of $.03. Smith Corporation plans to purchase options to cover its future payables. It will exercise the option in 90 days (if at all). It expects the spot rate of the pound to be $1.76 in 90 days. Determine the amount of dollars it will pay for the payables, including the amount paid for the option premium. A. $336,000. B. $344,000. C. $332,000. D. $360,000. E. $338,000.ATZ (US Company) expects to receive a 19 million euros in 90 days from a Australia customer. The current spot rate is S$1.836 per AUD, and the 90 day forward rate is S$1.638 per AUD. In addition, the annualized three-month AUD and USD interest rate 2.81% and 4.03%, respectively. What is the hedged value of the AUD receivable using the forward contract? How does that compare to a situation when the exchange rate remains unchanged at the spot rate?
