Looking at the CME FX options tables, a speculator sees the following quotes for the EUR option: Euro option contract size: EUR 10,000 The following quotes are in US cents per unit Strike Expiration Calls Puts 128 Jun Jun 129 130 131 22 3,35 3,04 2,56 2,10 1,45 0,95 1,33 1,67 2,23 2,89 3,34 3,67 Jun 132 133 Jun Today is January 6, 2014, and the spot rate is USD 1.31 per EUR. The speculator, who believes that by expiration date in June the EUR will have appreciated by 5%, has USD 20,000 to invest. a) Should he buy or sell, call or put options if he wants to make the most amount of money if his prediction comes true ? b) Which of the call options are in-the-money, at-the-money, out-of-the-money? How about the put options ? c) What is the time value of the 129 call ? of the 132 call ? d) He is deciding whether to work with either the 129 or the 132 strike options. Assuming he invests all his initial amount (USD 20,000) in either contact, how many contracts can he buy in either option ? e) If his assumption about the 5% appreciation of the EUR comes true, what is his dollar profit at expiration if a. He uses only the 129 strike options b. He uses only the 132 strike options C. What is his return on investment in either case ? d. Which is the best strategy, to invest all USD 20,000 in the 129 strike or the 132 strike, or a combination of both