Question
In: Finance
One year ago, you bought a put option on 200,000 euros with an expiration date of...
- One year ago, you bought a put option on 200,000 euros with an expiration date of one year. You paid a premium on the put option of $.05 per unit. The exercise price was $1.32. Assume that one year ago, the spot rate of the euro was $1.29, the one-year forward rate exhibited a discount of 3%, and the one-year futures price was the same as the one-year forward rate. From one year ago to today, the euro depreciated against the dollar by 4%. Today the put option will be exercised (if it is feasible for the buyer to do so).
a. Determine the total dollar amount of your profit or loss from your position in the put option.
b. Now assume that instead of taking a position in the put option one year ago, you sold a futures contract on 200,000 euros with a settlement date of one year. Determine the total dollar amount of your profit or loss.
Solutions
jeff jeffy answered 10 months agoRelated Solutions
One year ago, you sold a put option on 35,000 Euros with an expiration date of one year for a premium of $0.03 per unit.
One year ago, you sold a put option on 35,000 Euros with
an expiration date of one year for a premium of $0.03 per unit. The
exercise price was $1.25/Euro. Assume that one year ago, the spot
rate of the Euro was $1.23, the one-year forward rate was $1.24.
Today, the euro spot rate is $1.21.Determine the total dollar amount of your net profit or
loss in the put option.
You bought one of the $100 Apple put option contracts with a premium of $3.69. You...
You bought one of the $100 Apple put option contracts with a
premium of $3.69. You kept your position until the expiration date,
when Apple stock sells for $91.68, at that point you have a profit
of $_____________ from this transaction. Recall that
each contract includes 100
shares. Enter a negative
number for losses. Enter your answer in the box
below. Round your answer to two
decimals.
Consider the following option contract on the Euro: It is a put option for 125,000 euros,...
Consider the following option contract
on the Euro:
It is a
put option for 125,000 euros, with settlement
prices in terms of US dollars per one euro (i.e., if exercised,
euros will be exchanged for the appropriate number of dollars) The
strike price is 1.2000 dollars per euro, and the premium is 0.0300
dollars per euro.
Suppose a trader entered a long position by
buying seven of these put option contracts. What
would be the trader’s profit or loss if...
Consider the following option contract on the Euro: It is a put option for 125,000 euros,...
Consider the following option contract on the Euro:
It is a put option for 125,000 euros, with settlement prices in
terms of US dollars per one euro (i.e., if exercised, euros will be
exchanged for the appropriate number of dollars) The strike price
is 1.2000 dollars per euro, and the premium is 0.0300 dollars per
euro.
(a) Suppose a trader entered a long position by buying seven of
these put option contracts. What would be the trader’s profit or
loss...
You are to calculate a put option (European) that has 3 months left to expiration. The...
You are to calculate a put option (European) that has 3 months
left to expiration. The underlying stock does NOT pay dividends and
both the stock price and exercise price happen to be equal at $50.
If the risk free rate is currently 10% per annum, and the
volatility is assessed at 30% per annum, what is the change if a
dividend of $1.50 is expected to be paid in two months?
A French investor sold IBM stocks she bought one year ago. She had invested 1,000 Euros...
A French investor sold IBM stocks she bought one year ago. She
had invested 1,000 Euros to buy IBM shares for $50 per share and
sold the shares for $56.25 per share. The exchange rate was $/€ =
1.15 at the beginning and $/€ = 1.4504 at the end of the
period.
What is the Return on investment in Euro terms? It says the
answer is -10.81%
Consider a call option with an exercise price of $110 and one year to expiration. The...
Consider a call option with an exercise price of $110 and one
year to expiration. The underlying stock pays no dividends, its
current price is $110, and you believe it has a 50% chance of
increasing to $120 and a 50% chance of decreasing to $100. The
risk-free rate of interest is 10%
What is the hedge ratio?
What is the value of the riskless (perfectly hedged) portfolio
one year from now?
What is the value of the call option...
1. As an option approaches the expiration date, what should happen to the price of the...
1. As an option approaches the expiration date, what should
happen to the price of the option?
2. Suppose we have two stocks and the price of stock A is much
more volatile than the price of stock B. Which stock should have a
higher premium?
1a) Draw the payoff picture at expiration for a long position in a put option that...
1a) Draw the payoff picture at expiration for a long position in
a put option that has a premium of $3.50 and a strike price of
$35.
Draw the payoff picture for a short position in the put option
given in Problem 1a
Draw the payoff picture at expiration for a long position in a put option that has...
Draw the payoff picture at expiration for a long position in a
put option that has a premium of $3.50 and a strike price of
$60.
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