36 Profits from using currency options and futures.

On 2 July, the two-month futures rate of the Argentine peso contained a 2% discount (unannualized).

There was a call option on pesos with an exercise price that was equal to the spot rate. There was also a put option on pesos with an exercise price equal to the spot rate. The premium on each of these options was 3% of the spot rate at that time. On 2 September, the option expired. Go to http://

www.oanda.com (or any website that has foreign exchange rate quotations) and determine the direct quote of the Argentine peso. You exercised the option on this date if it was feasible to do so.

a What was your net profit per unit if you had purchased the call option?

b What was your net profit per unit if you had purchased the put option?

c What was your net profit per unit if you had purchased a futures contract on 2 July that had a settlement date of 2 September?

d What was your net profit per unit if you sold a futures contract on 2 July that had a settlement date of 2 September?