Describe why cash flow management is important to a business and its financial health. Use a recent financial news story as an e
1 answer:
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Answer:
Cachita should buy put on yen
Explanation:
Given:
The current spot rate = ¥120.00/$
in US $/¥ =
or
in US $/¥ = 0.0083
Maturity time = 90 days
Put on Yen Call on Yen
Strike Price 125/$ 125/$
Strike Price in $/¥ 0.008 0.008
Premium 0.00003/$ 0.00046/$
Therefore,
Here the strike price for put on Yen and call on Yen are same
but the premium for Put on Yen is less than the premium for the call on Yen
Therefore, Cachita should buy a put on yen to get the profit from the rise of the dollar
Answer:
Put options give the holder the right to sell the underlying stock to the seller of the put option.
Put options are advantageous when the price in the market falls below the strike price of the option because the buyer will be able to sell at above market value and make a profit.
The asking price for a strike price of $9.00 is listed to be $0.33 and this is the premium paid by the buyer of the Put Option.
<h2>1. Return if stock sells for $8.00</h2>
= Amount received/ Amount spent
= (No. of shares * ((Strike price - Market price) - Premium paid) ) / (No. of share * premium)
= (2,300 shares * (($9.00 - 8.00) - 0.33))/ ( 2,300 * 0.33)
= 2.03
= 203 %
<h2>2. Return if stock sells for $10.00. </h2>As this is an option, the investor can decide not to sell to the seller. The market price is higher than the strike price so they will not sell to the seller of the option and the return will be;
= (No. of shares * - Premium paid) ) / (No. of share * premium)
= (2,300 shares * - 0.33)/ ( 2,300 * 0.33)
= -1
= -100 %
