ADMS 1000 Lecture Notes - Lecture 24: Speculation, Straddle, Call Option

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ADMS 1000 Full Course Notes
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ADMS 1000 Full Course Notes
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Document Summary

In addition to the basic call and put options just discussed, a variety of currency option combinations are available to the currency speculator and hedger. For each of these combinations, the topics will be discussed. The two main types of currency option combinations are discussed. To construct a long straddle in a foreign currency, an mnc or individual would buy (take a long position in) both a call option and a put option for that currency. The basic call and put options just discussed, a variety of currency option combinations are available to the currency speculator and hedger. A currency option combination uses simultaneous call and put option positions to construct a unique position to suit the hedger"s or speculator"s needs. A currency option combination may include both long and short positions and will it be either long or short. Typically, a currency option combination will result in a unique contingency graph.

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