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23 Jul 2018
A pound call option with a strike price of $1.4 per euro is priced (i.e., the option premium) is at $0.06 per euro. The spot price is $1.35 per pound. a) What is the intrinsic value of the option? b) What is the breakeven spot exchange rate? c) What is the profit or loss for the buyer of this call option? d) What is the profit or loss for the seller of this call option?
A pound call option with a strike price of $1.4 per euro is priced (i.e., the option premium) is at $0.06 per euro. The spot price is $1.35 per pound. a) What is the intrinsic value of the option? b) What is the breakeven spot exchange rate? c) What is the profit or loss for the buyer of this call option? d) What is the profit or loss for the seller of this call option?
Lelia LubowitzLv2
26 Jul 2018
Related questions
Looking at the following options table:
| British Pound Option Prices (U.S. CENTS per Pound, 62,500 pounds per contract) | ||||||||
| US cents/£ | Call | Call | Call | Put | Put | Put | ||
| Spot Rate | Strike Price | May | June | July | May | June | July | |
| 144.8 | 144 | 0.88 | 1.42 | 1.44 | 0.52 | 1.06 | ----- | |
| 144.8 | 145 | 0.42 | 1.02 | ----- | ----- | ----- | ----- | |
| 144.8 | 146 | 0.2 | 0.68 | 0.72 | 1.75 | 2.32 | ----- | |
| QUESTION A: | Give me one example of an option that is out of the money? Be specific as far as month and strike price. Explain your answer? | |||||||
| QUESTION B: | Give me one example of an option that is in the money? Be specific as far as month and strike price. Explain your answer? | |||||||
| QUESTION C: | Which, if any, option is at the money? Explain your answer. | |||||||
| QUESTION D: | Looking at the July 144 CALL option, break down the option's premium into its Intrinsic Value and Time Premium components | |||||||
| Show your calculations. | ||||||||
| QUESTION E: | Looking at the June 146 PUT option, break down the options premium into its Intrinsic Value and Time Premium components | |||||||
| Show your calculations. | ||||||||
| QUESTION F : | If you purchase two (2) June 145.0 call options what will be the total amount of your premium that you need to pay? | |||||||
| QUESTION G: | Referring to QUESTION F, when do you pay the option premium, on the settlement date or on the date that you purchase the options? | |||||||
| QUESTION H: | Today you purchase three (3) June 144.0 Puts. On settlement date the spot rate = 142.5 cents per pound, what is your net profit/loss? | |||||||
| Show your calculations. | ||||||||
| QUESTION H: | Today you purchase two (2) June 144.0 Calls. On settlement date the spot rate = 143.5 cents per pound, what is your net profit/loss? | |||||||
