Which one is the correct answer Assume that a speculator purchases a put option on British...

Question

Question

Which one is the correct answer

Answer 1

Answer #1

SPECULATOR PURCHASES A PUT OPTION. HE WILL BENEFIT ONLY IF PRICE GOES DOWN

HERE PRICE HAS INCREASED, SO HE WILL NOT EXERCISE PUT OPTION.

HIS LOSS WILL BE EQUAL TO PREMIUM PAID.

PREMIUM PAID = 31250 UNITS X $0.05 PER UNIT = $1562.5 (LOSS)

ANSWER : (d) : - $1562.50 (THUMBS UP PLEASE)

Add a comment

Answer 2

Similar Homework Help Questions

Suppose Darlene is a speculator who buys five British pound call options with a strike price...

Suppose Darlene is a speculator who buys five British pound call options with a strike price of $1.50 and a March expiration date. The current spot price is $1.45 Darlene pays a premium of $0.01 per unit for the call option. Just before expiration, the spot price reaches $1.53 and Darlene exercises the option. Assume one option contract specifies 31,250 units. What is the profit or loss for Darlene?
A speculator buys a put option with a strike of $40 for $2.71. The stock is...

A speculator buys a put option with a strike of $40 for $2.71. The stock is currently priced at $43.63 and moves to $41.36 on the expiration date. The speculator will exercise the option on the expiration date (if it is feasible to do so). What is the speculator's profit or loss per share? (Do not ignore the premium paid.)
A speculator buys a put option with a strike of $40 for $2.75. The stock is...

A speculator buys a put option with a strike of $40 for $2.75. The stock is currently priced at $43.86 and moves to $42.57 on the expiration date. The speculator will exercise the option on the expiration date (if it is feasible to do so). What is the speculator's profit or loss per share? (Do not ignore the premium paid.)

I have the answers, I just need to know how to find the answers myself. a)...

I have the answers, I just need to know how to find the answers myself. a) Assume that a speculator purchases a European style put option on euros for $0.0599 per unit. The strike rate is 1.1231. A euro option represents 125,000 units. Assume that at the time of the purchase, the spot rate of the euro is $1.1728 and changes to $1.191 by the expiration date. The net profit for the speculator based on the information above is: Answer...
1. Adam buys a put option on British pounds (contract size is £500,000) at a premium...

1. Adam buys a put option on British pounds (contract size is £500,000) at a premium of S0.05/£. The strike price is $1.20/£. (a) Graph the profit/loss on the option contract. (b) What is the break-even price? (a) At what range of spot prices does John make profit? 2. Bank of America buys a call option on euros (contract size is €625,000) at a premium of $0.02 per euro. If the exercise price is $0.98 and the spot price of...
Randy Rudecki purchased a call option on British pounds for $.02 per unit. The strike price...

Randy Rudecki purchased a call option on British pounds for $.02 per unit. The strike price was $1.45 and the spot rate at the time the option was exercised was $1.46. Assume there are 31,250 units in a British pound option. What was Randy’s net profit on this option?

Randy Rudecki purchased a call option on British pounds for $.02 per unit. The strike price...

Randy Rudecki purchased a call option on British pounds for $.02 per unit. The strike price was $1.45 and the spot rate at the time the option was exercised was $1.46. Assume there are 31,250 units in a British pound option. What was Randy‘s net profit on this option? Show your work.
4) Assume that Smith Corporation will receive 100,000 British pounds in 90 days. A call option...

4) Assume that Smith Corporation will receive 100,000 British pounds in 90 days. A call option exists on British pounds with an exercise price of $1.65, a 90-day expiration date, and a premium of $.03. A put option exists on British pounds, with an exercise price of $1.61, a 90-day expiration date, and a premium of $.02. Determine the amount of dollars it will receive, including the amount paid for the option premium if it purchases and exercises an option....
Hello, Please provide details for the answers. Thank you! A put option on British pounds has...

Hello, Please provide details for the answers. Thank you! A put option on British pounds has a strike (or exercise) price of $1.60/BP and the put premium per British pound is $0.03. If he spot FX rate at the expiration date is $1.55/BP, what would be the net profit of this put option holder. (calculate the net profit calculation & draw a net profit graph precisely) 3. 0.02 US one year interest rate is 6% annual and EU one year...

Assume that Smith Corporation will need to purchase 200,000 British pounds in 90 days. A call...

Assume that Smith Corporation will need to purchase 200,000 British pounds in 90 days. A call option exists on British pounds with an exercise price of $1.68, a 90-day expiration date, and a premium of $.03. A put option exists on British pounds, with an exercise price of $1.69, a 90-day expiration date, and a premium of $.03. Smith Corporation plans to purchase options to cover its future payables. It will exercise the option in 90 days (if at all)....