Question

you are a speculator who sells a call option on swiss francs for a premium of $.06, with an exercise price of $.64. the option will not be exercised until the expiration date, if at all. if the spot rate of the swiss franc is $.69 on the expiration date, your net profit per unit, assuming that you have to buy swiss francs in the market to fulfill your obligation, is: group of answer choices

Answer 1

Net profit per unit assuming that you have to buy swiss francs in the market to fulfill your obligation will be  $.01

The computation of the net profit per unit is given below:

= Exercise price + Premium - Spot rate on the expiration date

= $0.64 + $0.06 - $0.69

= $0.01

Net profit divided by the number of units sold = net profit for the time period.

To calculate how much of the selling price you ultimately keep, compare your net profit per item to the price at which you sell each item.

In order to determine the genuine value per unit, we added the premium and subtracted the spot rate on the expiration date from the exercise price.

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The complete question is:

You are a speculator who sells a call option on Swiss francs for a premium of $.06, with an exercise price of $.64. The option will not be exercised until the expiration date, if at all. If the spot rate of the Swiss franc is $.69 on the expiration date, your net profit per unit is:

a.-$.02.

b.-$.01.

c. $.01

d. $.02

e.None of the above.