Question
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot
Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will depreciate versus the U.S. dollar in the coming 90 days, probably to about $1.35/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from:
Option choices on the Singapore dollar: | Call on S$ | Put on S$ | ||
Strike price (US$/Singapore dollar) | $1.32 | $1.37 | ||
Premium (US$/Singapore dollar) | $0.071 | $0.006 |
Samuel decides to sell call options in Singapore dollars. What is Samuel's (net) profit/loss (in dollars) per option if the spot rate is $1.48/S$ at maturity?
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