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 ago

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