Question $11$

Olga is a currency speculator; she is speculating that the price of the euro will go down in the future so she buys a put option.

In order to buy this option she pays a premium of $$\frac{0\mathrm{.}01}{}.$

The strike price of the option is $$\frac{1\mathrm{.}10}{}.$

The notional principal is $10,000$ euros.

Time goes by and the spot rate at maturity of the option is now $$\frac{1\mathrm{.}20}{}.$

Should Olga exercise this option?

No$,$ Olga is out of the money.

Yes, Olga is in the money,

Yes, Olga is at the money.

No$,$ Olga should wait until the notional principal increases in value.