b. Instead of using futures, you want to enjoy upside potential while protecting from downside risk. Should you buy a PUT option on CHF or a CALL option on CHF and how many PUT or CALL contracts will you need to fully hedge? Using your answer from question b, what is your net proceed in dollar (including premium) if the spot rate at the end of 90 days is $0.91/CHF?

You are expected to receive 5,000,000 Swiss Franc (CHF) from the importer 90 days later. You want to hedge against possible devaluation of CHF in the coming 90 days. The following table shows you about derivatives (futures and options) available to you. Call Option CHF 125,000.00CHF 62,500.00CHF 62,500.00 utures Put Option Contract Size Spot Rate(S/SF) today Future Rate (S/SF) today Strike Price (S/SF) Premium S per SH 0.95 0.90 0.95 S0.004 0.95