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6. A US importer is buying 1 million of equipment to be paid in December. The current spot rate is $0.5614 per DM (Mark). How
6. A US importer is buying 1 million of equipment to be paid in December. The current spot rate is $0.5614 per DM (Mark). How can he/she hedge against unexpected exchange rate changes using options? Assume that he/she wants a strike price of $0.57. Use the attached Wall Street Journal schedule.
| Option and Strike Underlying Price | W. Ger. Mark-Cents per units | Calls-Last | Puts-Last | ||||
| 62,500 DM | Nov. | Dec. | Mar. | Nov. | Dec. | Mar. | |
| 56.14 | 51 | r | r | r | r | 0.06 | 0.32 |
| 56.14 | 52 | r | r | r | 0.03 | 0.09 | 0.52 |
| 56.14 | 53 | r | r | r | 0.05 | 0.28 | 0.65 |
| 56.14 | 54 | r | r | r | 0.15 | 0.22 | r |
| 56.14 | 55 | r | 1.92 | r | 0.33 | 0.43 | r |
| 56.14 | 56 | 0.97 | 1.23 | 1.99 | 0.96 | 75 | r |
| 56.14 | 57 | 0.54 | 0.82 | r | r | r | r |
| 56.14 | 58 | 0.40 | 0.38 | 1.15 | r | r | r |
| 56.14 | 59 | s | .30 | r | s | 3.10 | r |
| Option and Strike Underlying Price | W. Ger. Marks-EuropeanStyle | Calls-Last | Puts-Last | ||||
| 62,500 DM | Nov. | Dec. | Mar. | Nov. | Dec. | Mar. | |
| 56.14 | 56 | r | r | r | r | r | 1.40 |
| 56.14 | 57 | r | r | 1.55 | r | r | r |
r: Not traded
s: No option offered
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