Because of the liquidity of US derivatives markets, M has decided to hedge this currency risk in a US trading account. In December 1992, the /$-spot exchange rate is $1=124.86, and M is purchasing $25M of inventory for Q1, 1993 sales.

Futures contracts trade in the US, one contract is on 12.5M. How does M hedge the March payment assuming it wants to use the delivery feature in the contract? Futures are quoted as $/ and the March futures quote is $0.008032, April is $0.008039.

When delivery is completed, what is the final net cost of this inventory for M, where net means net of the margin P&L?

Puts and calls on Yen futures are trading, again one option is on 12.5M. Strike prices are quoted like futures as $/, and the available strike most attractive to M is $0.00803, which is quoted as 80.3 (i.e. Quote = 10,000xstrike). Should M do puts or calls, long or short?