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You work as a senior currency trader for Green valley capital Limited. The CEO, selena Cruz, is fairly confident that the US dollar will depreciate
You work as a senior currency trader for Green valley capital Limited. The CEO, selena Cruz, is fairly confident that the US dollar will depreciate significantly against the British pound as the US interest rate will rise much less than anticipated in the next 60 days. So, she informs you to develop some speculation strategies with the use of Pound futures and options with the following information: Current spot rate = $1.20/pound 60-Day futures rate = $ 1.23/pound 60-Day put option on pound Strike price = $ i.25/pound premium = $0.05/pound 60-Day call option on Pound Strike price = $ i.25/pound Premium = $ 0.05/pound Assume each futures and option contracts are for pound 10.000. Selena wants you to answer the following questions and calculate all speculation profits in US Dollar, based on one futures/option contract. Speculation with futures: Should you buy or sell a Pound futures contract? No explanation needed. Determine the potential maximum profit and potential maximum loss of your futures contract
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