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The spot exchange rate between Australian dollars (AUD) and US Dollars (USD) is AUD 1.00 = USD 0.72. You believe that in 4 weeks time,
The spot exchange rate between Australian dollars (AUD) and US Dollars (USD) is AUD 1.00 = USD 0.72. You believe that in 4 weeks time, the exchange rate will be AUD 1.00 = USD 0.75. Options are currently available with a strike price of AUD 1.00 = USD 0.725.
Which option position is best suited to profit if your speculation proves to be correct?
a: A long call option covering AUD 10,000
b: A long put option covering AUD 10,000
c: Both of the above will profit if your prediction proves to be correct.
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