1. You bought a put option for 125,000. The exercise price is $1.8/. The option premium is $0.05/.

a. Please draw the profit diagram for your total position. Show the total premium as well as the break-even point.

b. If the exchange rate in three months is $1.40/, what would be your profit/loss?

c. If, instead, the exchange rate in three months is $1.77/, what would be your profit/loss?

d. If, instead, the exchange rate in three months is $1.95/, what would be your profit/loss?

2. You have a short position on at a price of $1.5/. You also sold a put option on with an option premium of $0.05 a share and an exercise price of $1.48/. What will be your total profit/loss per euro from these two positions if the exchange rate on the expiration date is:

$1.34/

$1.55/

3. What is the difference between a covered call and a long currency? In other words, why do we do a covered call? What is the advantage of it?

4. Why would anyone do a long synthetic or a short synthetic? What is the difference between a long synthetic and a long currency? What is the difference between a short synthetic and a short currency?

5. You bought a call option on with an exercise price of $2 and you paid $0.05/ as premium. At the same time, you sold a put on with an exercise price of $2 and you received $0.12/ as premium.

a. Please draw the combined profit graph. Show all appropriate numbers.

b. What is the name of this strategy?

c. What is the break-even point?

d. What is your profit/loss if S_T = $1.94/?

e. What is your profit/loss if S_T = $1.99/?

f. What is your profit/loss if S_T = $2.10/?