Assuming Call option in the foreign exchange market (using the dollar-peso exchange rate), explain briefly the...
Assuming Call option in the foreign exchange market (using the dollar-peso exchange rate), explain briefly the following market scenarios: a) in the money; b) at the money; and c) out of the money.
Homework Answers
Answer:
in-the-Money, At-the-Money, and Out-of-Money;with reference to Options are described as under
These terms describe the position of options contract from the
trader’s perspective both Buyer and Seller of an option
(i) in the Money: It is a situation, when exercising the option
would be advantageous and result in gain or profit to the option
holder.
(ii) At the Money: Exercise of option in this position, would
neither result in a gain or loss to the option holder.
At this stage the Current Market Price (CMP) and the Exercise Price
(EP) are equal.
(iii) Out of Money: Exercise of option in this situation would
result in a loss to the Option Holder.
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Assuming Call option in the foreign exchange market (using the
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