Question

If we long a European put option on Euro. The strike price is $1.7362/€. The option...

If we long a European put option on Euro. The strike price is $1.7362/€. The option premium is $0.0559/€. What is future spot rate that makes the option “at-the-money”?

A.

$1.7362/€
B.

$0.0559/€
C.

$1.6803/€
D.

$1.7921/€
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Answer #1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Put option:
When share prices below the strike price then put option is in the money, otherwise, it is out of money.

It is at the money when the share price is equal to the strike price.

For put option as strike price increases, the value of premium must increase.

Here the strike price is $1.7362/€

The option is said to be at the money when it's the forward price is $1.7362/€

The answer is: A. $1.7362/€

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