Maurice Tutor

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    Oct-2001 - Nov-2016

Category > Management Posted 17 Jan 2018 My Price 6.00

Estimating Profits from Currency Futures

24.   Estimating Profits from Currency Futures and  Options. One year ago, you sold a put option on 100,000 euros with an expiration date of one year. You received a premium on the put option of $.04 per unit. The exercise price was $1.22. Assume that one year ago, the spot rate of the euro was $1.20, the one-year forward rate exhibited a discount of

2 percent, and the one-year futures price was the same as the one-year forward rate. From one year ago to today, the euro depreciated against the dol- lar by 4 percent. Today the put option will be exer- cised (if it is feasible for the buyer to do so).

a. Determine the total dollar amount of your profit or loss from your position in the put option.

b. Now assume that instead of taking a position in the put option one year ago, you sold a futures contract on 100,000 euros with a settlement date of one year. Determine the total dollar amount of your profit or loss.

 

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Maurice Tutor
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Status NEW Posted 17 Jan 2018 10:01 PM My Price 6.00

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