Wheat prices are currently $$300.$ You traded an Option for $$5\mathrm{.}00$ with a strike price of $$320$ to hedge the risk of an increase in wheat prices in the next three months. Three months later, the price of wheat became $$350.$ What type of Option did you trade and what is your payoff net of premium from trading the option?

Answer

a$.$I bought a put Option; my net value is $$25\mathrm{.}00.$

b$.$I bought a call Option; my net value is $$25\mathrm{.}00.$

c$.$I bought a call Option; my net value is $$45\mathrm{.}00.$

d$.$I sold a put Option; my net value is $$30,00.$