Question

the premium of a currency put option should increase if: the spot rate increases. none of these are correct. the volatility of the underlying asset increases. the volatility of the underlying asset increases and the spot rate increases.

Answer 1

The premium of a currency put option should increase if: ​the volatility of the underlying asset increases. ​If the futures rate is lower than the forward rate, astute investors would attempt to simultaneously buy futures and sell forward.

What is a put option on currency?

• The owner of a currency put option is granted the right, but not the responsibility, to sell a certain currency at a particular price within a predetermined window of time.
• Features.As investors are not required to buy or sell the CO underlying the Option at expiration, investors should limit losses to the premium paid.give investment portfolios defense against changes in exchange rates.Permit the holder to set import and export pricing.

• The only time currency put options are beneficial is when currency values are falling.(Exercise Price Spot Exchange Rate) x Put Purchase Price equals the gain on a currency put. A contract that grants the buyer the right, but not the responsibility, to purchase or sell a specific currency at a particular exchange rate on or before a set date is known as a currency option (also known as a forex option).

• The vendor receives a premium in exchange for this right. By effectively keeping a short-selling position, put purchasers profit.When the stock price drops below the strike price before the expiration time, the owner of a put option makes money.

• Within the designated expiration period, the put buyer may exercise the option at the strike price. In order to increase their profit from a stock's decrease, traders purchase put options.A trader can make money from stock prices below the strike price up until the option's expiration for a minor up-front investment.When purchasing a put, you often anticipate a decline in the stock price before the option expires.

To learn more about currency put option  refer

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