Question

Gretchen Van Damme is considering buying call option on Swiss
francs on the International Monetary Market of the Chicago
Mercantile Exchange with a March expiration date and a strike price
of $0.77/SF. The current spot rate of exchange is $0.77/SF.
Gretchen believes that the spot rate in March will be between
$0.74/SF and $0.81/SF, with a most likely value of $0.77/SF.

a. Calculate Gretchen's gain or loss at closing spot rate of
$0.74/SF, $0.77/SF, and $0.81/SF.

b. Diagram the value of Gretchen's Swiss franc call option at
expiration.

c. Suppose the price of a call option on Swiss francs is
$0.02/SF, diagram the profit or loss on Gretchen's Swiss francs
call option at expiration as a function of the underlying S$/SF
exchange rate

Answer #1

**ANSWER IN THE IMAGE. FEEL FREE TO ASK ANY DOUBTS. THUMBS
UP PLEASE.**

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...

1. You buy a put option with strike price of $25. Currently, the
market value of the underlying asset is $30. The put option premium
is $3.25. Assume that the contract is for 150 units of the
underlying asset. Assume the interest rate is 0%. a. What is the
intrinsic value of the put option? b. What is the time value of the
put option? c. What is your net cash flow if the market value of
the options’ underlying...

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