ADMS 1000 Lecture Notes - Lecture 31: Put Option, Call Option

• School: York University
• Department: Administrative Studies
• Course: ADMS 1000
• Professor: Alan Shapiro

Document Summary

The worksheet for a long currency strangle is similar to the worksheet for a long currency straddle, as the following example shows. Put and call options are a(cid:448)ailable for euros (cid:894) (cid:895) (cid:449)ith the follo(cid:449)i(cid:374)g i(cid:374)for(cid:373)atio(cid:374) The call option will be in the money when the foreign currency value is higher than its strike price at option expiration. Conversely, the put option is in the money at euro values below the put option exercise price of . 05. The two break-even points for a long strangle position are located below the put option premium and above the call option premium. The lower break-even point is equal to the put option strike price less both premiums (. 005 . 05 $. 045) For a long currency strangle is similar to the worksheet for a long currency straddle, as the following example shows. Put and call options are available for euros (cid:894) (cid:895) (cid:449)ith the follo(cid:449)i(cid:374)g i(cid:374)for(cid:373)atio(cid:374) Call option premium on euro $. 025 per unit.