Question

assume a speculator purchased a call option on swiss francs for .02 per unit. the strike price was 0.45 and the spot rate at expiration was 0.48. assume there are 62,500 units in a swiss franc optiona. what was the net profit on this option to the speculator

Answer 1

Net profit per unit = -0.1

Step-by-step explanation:

given data

purchased a call option = .02 per unit

strike price = 0.45

spot rate = 0.48

swiss franc option = 62,500 units

solution

we get here Premium that is .02 of 62,500 is = 1250

so here Net profit per unit will be

Net profit per unit = strike price + Premium - Spot rate ......................1

put here value

Net profit per unit = 0.2 + 0.45 - 0.48

Net profit per unit = -0.1