In: Finance
You trade in two types of options. First, you purchase 7 call option contracts on the Euro with an exercise price of 1.25. Second, you sell 8 put option contracts on the Euro with an exercise price of 1.22. The fees/prices on the contracts are $.04 (calls) and $.03 (puts). Forward Rates for the Euro are 1.210-11 $/E. If contract sizes for Euros are 125,000 options per contract and the final price of Euros is 1.40. $/E, how much profit/loss have you made from participation in options?
Particulars | Call | Put | Total |
Strike price | 1.250 | 1.220 | |
Expiration price | 1.400 | 1.400 | |
Option status | Exercise | Lapse | |
Profit per Euro | 0.150 | ||
× Number of options per contract | 125,000 | 125,000 | |
× total contracts | 7.000 | 8.000 | |
Total payoff | 131,250 | 131,250 | |
Option premium flow | (35,000) | 30,000 | (5,000) |
Net profit | 126,250 |
Net profit is 126,250
please rate.