Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A trader predicts that there are upward price movements of USD/ in the near future, so he decides to construct a bull spread by using
A trader predicts that there are upward price movements of USD/ in the near future, so he decides to construct a bull spread by using call options available for him given below: Call option with strike price = $1.16/, and premium $0.01 per unit. Call option with strike price = $1.19/, and premium $0.005 per unit. One option contract represents 100,000. If the trader buys one call option contract and simultaneously sells one call option contract at the different strike price to construct the bull strategy, what will be the trader's profit if the spot rate on the option expiration date is 1=$1.162? (Hint: Calculate the net payoff per unit based on the spot rate on the expiration date first. Then multiply the net payoff per unit with the contract size that the traded uses.) 0-$200. 0-$300. 0-$150. 0-$350. A trader predicts that there are upward price movements of USD/ in the near future, so he decides to construct a bull spread by using call options available for him given below: Call option with strike price = $1.16/, and premium $0.01 per unit. Call option with strike price = $1.19/, and premium $0.005 per unit. One option contract represents 100,000. If the trader buys one call option contract and simultaneously sells one call option contract at the different strike price to construct the bull strategy, what will be the trader's profit if the spot rate on the option expiration date is 1=$1.162? (Hint: Calculate the net payoff per unit based on the spot rate on the expiration date first. Then multiply the net payoff per unit with the contract size that the traded uses.) 0-$200. 0-$300. 0-$150. 0-$350
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started