Question

Everything you have read lately about the canadain economy suggests thats its growth rate is strengthening...


Everything you have read lately about the canadain economy suggests thats its growth rate is strengthening and that Bank of Canada is expeceted to increase its interest rate by september. You are a speculator with 2 million to use.

Q. How would you react to this news using the options market? would you buy/sell call options or buy/sell put options on interest rate futures? explain your reasoning.
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Answer #1

If Canadian bank will opt for change in interest rate it can be have chance to adapt within the market and economy.

If you opt for call option "right to buy" for that economy with 2 million it is good for it has certain scope depends on particular interest rate, it is better to buy in call market for Canadian economy for short run.

if you opt for Put option "right to sell" you can adopt for put option for long run market in Canadian economy.

In this case for September we can adopt for call option for short run and sell in the put option for long run in this situation.

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