Consider the following option contract on the Euro It is a call option for 125,000 euros, but here the settlement prices are in terms of Swiss franc per one euro (i e , if exercised, 125,000 will be delivered in exchange for the appropriate number of francs) The strike price is 1 07 franc per euro, and the premium is 0 0060 franc per euro Suppose a trader writes one of these call option contracts What would be the traders profit or loss if the spot rate upon the option expiration is 1 0800 francs per euro A different options trader purchased one of these call option contracts What would be the profit or loss if the spot rate upon the option expiration is 1 0600 francs per euro Another trader wrote two of these put option contracts What would be this traders profit or loss if the spot rate upon the option expiration is 1 0500 francs per euro Suppose that soon after taking these positions (but before their expiration), the value of the euro would appreciate substantially, well beyond expectations Would it benefit the long position in this option or the short position

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Posted on Jul 11, 2024

Consider the following option contract on the Euro: It is a call option for 125,000 euros, but here the settlement prices are in terms of

Consider the following option contract on the Euro:

It is a call option for 125,000 euros, but here the settlement prices are in terms of Swiss franc per one euro (i.e., if exercised, 125,000 will be delivered in exchange for the appropriate number of francs) The strike price is 1.07 franc per euro, and the premium is 0.0060 franc per euro.

Suppose a trader writes one of these call option contracts. What would be the traders profit or loss if the spot rate upon the option expiration is 1.0800 francs per euro?
A different options trader purchased one of these call option contracts. What would be the profit or loss if the spot rate upon the option expiration is 1.0600 francs per euro?
Another trader wrote two of these put option contracts. What would be this traders profit or loss if the spot rate upon the option expiration is 1.0500 francs per euro?
Suppose that soon after taking these positions (but before their expiration), the value of the euro would appreciate substantially, well beyond expectations. Would it benefit the long position in this option or the short position?