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Dominic, a speculator buys a Euro call option with a strike price of 40 USD and with an October settlement date. The current spot rate
Dominic, a speculator buys a Euro call option with a strike price of 40 USD and with an October settlement date. The current spot rate stands at 1 Euro to 30 USD. It is given that October option attracts a premium of 4 cents per unit of call option. Just before expiry in September, the Euro to Dollar changes to 45 USD to a Euro. Dominic decides to contract. Calculate the gain or loss if one option goes for 45,000 units of Euros and comment.
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