Question

A
put option on Japanese yen has a strike (exercise) price of $.012.
The present exchange rate is $.011. This put option can be referred
to as:?

Answer #1

A put option is an option to sell the underlying asset at the
strike price on maturity. So, a put option holder will exercise the
option only if the market price on maturity is less than the strike
price. Therefore, a put option will be 'In the money', if Strike
price is *higher* than the market price, 'Out of the money'
if Strike price is *lower* than the market price and 'At the
money' if strike price equals the marke price.

In the present case, since Strike price of $0.012 is
*higher* than market price of $0.011, the put option is
*In the Money.*

a. A speculator purchased a call
option on Japanese Yen at a strike price of $0.70 and for a
premium of $.06 per unit. At the
time the option was exercised if the Japanese Yen spot
rate was $.75
a) Find the speculator’s net profit
per unit?
b) If each contract is made up of
62500 units what is the net profit per contract?
c) At which spot price will the
speculator break even?
d) What is the...

Assume the August call and put option on Swiss francs have the
same strike price of 58½ ($0.5850/SF), and premium of $0.005/SF. In
what price range the purchase of the PUT option would choose to
exercise the option?
a) At all spot rates above the strike price of 58.5
b) At the strike price of 58.5
c) At all spot rates below the strike price of 58.5
d) At all spot rates below the 59 (strike price of 58.5 plus...

Kiko Peleh's Puts. Kiko Peleh writes a put option on Japanese
yen with a strike price of $ 0.008000/¥ (¥ 125.00/ $) at a premium
of 0.0080¢ per yen and with an expiration date six months from now.
The option is for ¥12,500,000. What is Kiko's profit or loss at
maturity if the ending spot rates are ¥111/$, ¥114/$, ¥120/$,
¥126/$, ¥131/$, ¥136/$,
and ¥141/$.
Kiko's profit or loss at maturity if the ending spot rate is
¥111 /$ is...

A speculator is considering the purchase of five three-month
Japanese yen call options with an exercise price of $0.0096 per
yen. Each option contract is for 1,000,000 yens. The option premium
is $0.000135 per yen. The spot price is $0.009528 per yen and the
90-day forward rate is $0.009571 per yen. What will be the
speculator’s profit if the yen appreciates to $0.0100 per yen at
option expiration? SHOW YOUR WORK
A speculator is considering the purchase of five three-month...

A European put option is currently worth $3 and has a strike
price of $17. In four months, the put option will expire. The stock
price is $19 and the continuously compounding annual risk-free rate
of return is .09. What is a European call option with the same
exercise price and expiry worth? Also, given that the price of the
call option is $5, show how is there an opportunity for
arbitrage.

An investor writes a put option with exercise (strike) price of
$80 and buys a put with exercise price of $65. The puts sell for $8
and $3 respectively. If the options are on the same stock with the
same expiration date,
i. Draw the payoff and profit/loss diagrams for the above
strategy at expiration date of options
ii. Calculate the breakeven point for this strategy and discuss
whether the investor is bullish or bearish on the underlying
stock.

Consider a trader who buys a put option on Sterling pounds at a
strike price of $ 1.4700, for a premium of
$ 0.02. If exchange rates are
1.4378, 1.4458,
1.4500, 1.4682 and
1.4725. Calculate the gain or loss and state
whether he will exercise the option or not.
(Please provide detailed answer)

Barry speculates in the foreign currency exchange market.
Currently the spot price for the Japanese yen is ¥129/$ and the
6-month forward rate is ¥128 /$. Barry believes the yen will become
¥126.00/$ in the next six months.
To profit as a speculator, Barry should ________ at ________
.
Select one:
a. buy dollars; the forward rate
b. sell yen; the forward rate
c. buy yen; the forward rate
d. buy dollars; spot rate

A call option with a strike price of $30 costs $1.5. A put
option with a strike price of $25 costs $2.5. Explain how a
strangle can be created from these two options. What is the pattern
of profits from the strangle?

A put option with a strike price of $90 sells for $6.3. The
option expires in four months, and the current stock price is
$92.3. If the risk-free interest rate is 4.3 percent, what is the
price of a call option with the same strike price? (Round your
answer to 2 decimal places. Omit the "$" sign in your response.)
Price of a call option $

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