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Suppose Derrick wanted the option to buy 100,000 Japanese Yen () at a strike price of $0.45/Yen (American Quote). For this right, the premium is
Suppose Derrick wanted the option to buy 100,000 Japanese Yen () at a strike price of $0.45/Yen (American Quote). For this right, the premium is 1.35 cents/1Yen and the option to buy Yen expires in December. The current spot is: $0.42/Yen. What will Derrick pay now in order to have this option to buy Yen in December? At what strike price will he make money? Lose money? If the spot goes to $0.95/Yen in October, what should Derrick do? How much does he stand to lose or gain??
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