Question

A call option on the euro expiring in Six months has an exercise price of $1.00...

A call option on the euro expiring in Six months has an exercise price of $1.00 and is priced at $ 0.0385. Construct a simple long position in the call. determine the profit from the following basic foreign currency option transactions for each of the following spot rates at expiration: $0.90, $0.95, $1.00, $1.05, and $1.10. Construct a profit graph. Find the breakeven spot rate at expiration. Assume that each contract covers 100,000 euros.

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