Assume that a speculator purchases a put option on British pounds (with a strike price of

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Here is the answer for the question – Assume that a speculator purchases a put option on British pounds (with a strike price of. You’ll find the correct answer below

Assume that a speculator purchases a put option on British pounds (with a strike price of $1.50) for $.05 per unit. A pound option represents 31,250 units. Assume that at the time of the purchase, the spot rate of the pound is $1.51 and continually rises to $1.62 by the expiration date. The highest net profit possible for the speculator based on the information above is:

The Correct Answer is

premium of the option is $0.05*(31,250 units) = -$1,562.50 … since the option will not be exercised, the net profit will be -$1,562.50.

Reason Explained

premium of the option is $0.05*(31,250 units) = -$1,562.50 … since the option will not be exercised, the net profit will be -$1,562.50. is correct for Assume that a speculator purchases a put option on British pounds (with a strike price of

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