Question
John is a Forex trader. He focuses principally on the Singapore dollar/Us dollar (S$/$) cross-rate. The current spot rate is S$1.44/$. After considerable study, he
John is a Forex trader. He focuses principally on the Singapore dollar/Us dollar (S$/$) cross-rate. The current spot rate is S$1.44/$. After considerable study, he concludes that the exchange rate, in the coming 180 days, will probably be about S$1.50/$. He has the following options on the Singapore dollar to choose from:
Option | Strike Price | Premium |
Put on S$ | S$1.4700/$ | S$0.003/$ |
Call on S$ | S$1.4700/$ | S$0.004/$ |
Discuss whether he should buy a Put on S$ or Call on S$, and what would be his net profit if the spot rate at the end of the 180 days is indeed S$1.50/$.
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