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Suppose you are going to receive a unit of underlying asset (e.g. 10 ounces of Gold or Euro 100,000) in a year. The price of
Suppose you are going to receive a unit of underlying asset (e.g. 10 ounces of Gold or Euro 100,000) in a year. The price of the underlying asset is volatile, and you want to receive a certain minimum dollar amount when you receive a unit of underlying asset in a year regardless of the price in one year. What can you do now?
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Buy a call option (the right to buy the underlying asset in the future).
Buy a put option (the right to sell the underlying asset in the future).
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