Assume there is an American call option on GBP/USD at a strike price of GBP/USD 1.27...
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Assume there is an American call option on GBP/USD at a strike price of GBP/USD 1.27 and a premium of USD0.045 per GBP. The expiration date is in three months and the size of the contract is USD150,000. a) Assume you bought the call option. Draw a graph that shows your P&L should you choose to exercise the option prior to maturity when GBP/USD is trading between GBP/USD 1.25 and GBP/USD 1.34. (5 marks) b) Repeat part a) assuming that you are the writer of this call option. (5 marks) Assume there is an American call option on GBP/USD at a strike price of GBP/USD 1.27 and a premium of USD0.045 per GBP. The expiration date is in three months and the size of the contract is USD150,000. a) Assume you bought the call option. Draw a graph that shows your P&L should you choose to exercise the option prior to maturity when GBP/USD is trading between GBP/USD 1.25 and GBP/USD 1.34. (5 marks) b) Repeat part a) assuming that you are the writer of this call option. (5 marks)
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Answer rating: 100% (QA)
a If you bought the call option To draw the PL graph we need to consider the relevant price range for GBPUSD and calculate the profit or loss based on ... View the full answer
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