Question
You have $75,000 that you want to use to speculate in Swiss franc (SF) options. The spot rate is SF0.9662/$. You think that, at this
You have $75,000 that you want to use to speculate in Swiss franc (SF) options. The spot rate is SF0.9662/$. You think that, at this rate, the SF is underpriced and, therefore, you expect it to substantially appreciate against the dollar in the coming few weeks. You decide to use your $75,000 to act on your expectations. The SF three-week calls and puts with an exercise price of $1.0564/SF are selling for (i.e. premiums are) $0.0240/SF and $0.0280/SF respectively. (Each SF contract calls for the exchange of SF62,500)
How many contracts can you buy with the money you have?
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