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In: Accounting
A put option to sell 62,500 Euros in three months for $0.9200/€ (strike price) has a premium of 1.52 cents
A put option to sell 62,500 Euros in three months for $0.9200/€ (strike price) has a premium of 1.52 cents per Euro. If the spot rate on the expiration date of the option is $0.9000/€, what is the overall profit/loss of the put writer?
• zero
• $300
• $1250
• $950
Solutions
Expert Solution
The right option is the second option "-$300".
Explanation:
Option premium = 62500*0.0152$
= 950 (gain)
Loss on contract = 62500(0.92 - 0.90)
= 62500*0.02
= -1250(loss)
950 - 1250 = -$300
The right option is "-$300".
Hence, the right option is "-$300".
The right option is "-$300".
Junaid answered 1 year agoRelated Solutions
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