a) Define currency options contract. What are put and call options?

(b) You bought a Dec. 22 put option on euro with a strike price (K) of $1.1850/ in June 22 and paid a premium of $0.015/. The current spot exchange (S) rate for euro is $1.1750/. Contract size = 125,000

(i) What is the profit/loss if the option is exercised at expiration if the spot rate settles at $1.1650/? (ii) if the spot rate settles at $1.1950? The U.S. interest rate is 2%.