A Japanese exporter has a 1,000,000 receivable due in one year. Detail a strategy using options that will eliminate exchange rate risk.

Listed Options

a. Buy 16 put options on euro, sell 10 call options on yen.

b. Buy 16 put options on euro, buy 10 call options on yen.

c. Sell 16 call options on euro, buy 10 put options on yen.

d. Buy 16 put options on euro, buy 12 call options on yen.

e. none of the options.

Euro62,500 Yen12,500,000 Strike $1.25 1.00 $1.00 = 120 Puts $0.0075 per $0.0075 per100 Calls $ 0.01 per 0.01 per100