Wendy Wallace, Assistant Treasurer for Magic International, is working on potential hedging strategies because the company has transaction exposure to the Euro. Wendy first netted out the 90-day Euro exposures of all accounts receivable and accounts payable. As a result, she found the company had exposure to currency fluctuations because a net of 10 million Euros were owed. To eliminate the risk, she could use futures contracts with a forward rate of $1.40 per Euro. She could also use an option on Euros with a strike price of $1.38 and a premium of $.04. You are an advisor that Ms. Wallace hires periodically because of your expertise in currency matters.