As a manager of a U.S. domestic company, you are concerned about the foreign currency exposure of your firms sales to the United Kingdom. You are currently export $10 million of products to the United Kingdom annually and receive payment in pounds sterling. You send two large shipments each year valued at $5 million each. The invoice carries net 90-day terms. Thus, from the invoice date, your company is exposed to currency exchange risk for a period of 90 days.

You are considering the possibility of using futures, options, or futures options as possible hedging tools. Your broker recently sent you the following data on the various hedging contracts available for your June 1 invoice with payments due September 1.

Current exchange rate (June 1) $1.67 per pound

Assumed spot exchange rate on September 1 is $2.00

$90-day forward rate as of June 1: $1.65

Options (31,250)
Striking price	June 1, September Call Premium		Call Premium September 1
165.0	4.35		35.00
170.0	2.40		30.00
175	1.20		25.00
Future options (62,500)
Striking price		June 1, September Call Premium		Call Premium September 1
1650		4.12		33.00
1700		2.20		27.00
1750		1.06		22.00
Future (62,500)
		June 1 Settle		September 1 Settle
September		1.6496		2.055

Assume you dont hedge. Calculate the dollar loss occurring from the change in exchange rates from June 1 to September 1.