I am the manager of a soccer team I have a match scheduled for the 15th of July 2022 Due to the COVID 19 crisis, I am unsure whether the match will go ahead If the match goes ahead, I will receive 1,000,000 EUR in sponsorship fees I will receive the money as soon as the match concludes I wish to convert all EUR to AUD immediately upon payment I have access to the following instruments 1) An American put option on the EUR Exercise price E $ 1 25 Expiry 15th of July 2022 Contract size 50,000 EUR Premium $0 07 2) An American call option on the EUR Exercise price E $ 1 25 Expiry 15th of July 2022 Contract size 50,000 EUR Premium $0 07 3) A European put option on the EUR Exercise price E $ 1 25 Expiry 15th of July 2022 Contract size 50,000 EUR Premium $0 04 4) A European call option on the EUR Exercise price E $ 1 25 Expiry 15th of July 2022 Contract size 50,000 EUR Premium $0 04 What should I do Note E T denotes the spot exchange rate E $ on 15th of July 2022 A Sell 20 American call options on the EUR now Exercise the option on the 15th of July if E T 1 25 B Buy 20 European put options on the EUR now Exercise the option on the 15th of July if E T 1 25 C Sell 20 American put options on the EUR now Exercise the option on the 15th of July if E T 1 25 D Buy 20 European call options on the EUR now Exercise the option on the 15th of July if E T 1 25 E Buy 20 American call options on the EUR now Exercise the option on the 15th of July if E T 1 25

Question

I am the manager of a soccer team  I have a match scheduled for the 15th of July 2022  Due to the COVID 19 crisis, I am unsure whether the match will go ahead  If the match goes ahead, I will receive 1,000,000 EUR in sponsorship fees  I will receive the money as soon as the match concludes  I wish to convert all EUR to AUD immediately upon payment  I have access to the following instruments  1) An American put option on the EUR  Exercise price  E $   1 25  Expiry  15th of July 2022  Contract size   50,000 EUR  Premium  $0 07  2) An American call option on the EUR  Exercise price  E $   1 25  Expiry  15th of July 2022  Contract size   50,000 EUR  Premium  $0 07  3) A European put option on the EUR  Exercise price  E $   1 25  Expiry  15th of July 2022  Contract size   50,000 EUR  Premium  $0 04  4) A European call option on the EUR  Exercise price  E $   1 25  Expiry  15th of July 2022  Contract size   50,000 EUR  Premium  $0 04  What should I do  Note  E T denotes the spot exchange rate E $  on 15th of July 2022  A  Sell 20 American call options on the EUR now  Exercise the option on the 15th of July if E T  1 25 B  Buy 20 European put options on the EUR now  Exercise the option on the 15th of July if E T  1 25 C  Sell 20 American put options on the EUR now  Exercise the option on the 15th of July if E T  1 25 D  Buy 20 European call options on the EUR now  Exercise the option on the 15th of July if E T  1 25 E  Buy 20 American call options on the EUR now  Exercise the option on the 15th of July if E T  1 25

Accepted Answer

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	A.	Sell 20 American call options on the EUR now. Exercise the option on the 15th of July if E^T>1.25
	B.	Buy 20 European put options on the EUR now. Exercise the option on the 15th of July if E^T<1.25
	C.	Sell 20 American put options on the EUR now. Exercise the option on the 15th of July if E^T<1.25
	D.	Buy 20 European call options on the EUR now. Exercise the option on the 15th of July if E^T>1.25
	E.	Buy 20 American call options on the EUR now. Exercise the option on the 15th of July if E^T>1.25

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I am the manager of a soccer team. I have a match scheduled for the 15th of July 2022. Due to the COVID-19 crisis, I

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