Question

A put option on $15,000 with a strike price of 0.666/$ is the same thing as a call option on 10,000 with a strike price of 1.50.

a) Hedging against currency depreciation
b) Speculating on stock prices
c) Investing in commodities
d) Leveraging market volatility

Answer 1

The correct answer is option a. This scenario relates to hedging against currency depreciation. The put option and call option allow the investor to mitigate the risk of currency fluctuations and maintain a certain level of financial stability.

Step-by-step explanation:

A put option on $15,000 with a strike price of 0.666/$ is the same thing as a call option on 10,000 with a strike price of 1.50.

This scenario relates to hedging against currency depreciation. Hedging is a strategy used to protect against potential losses caused by changes in exchange rates. In this case, the put option and call option allow the investor to mitigate the risk of currency fluctuations and maintain a certain level of financial stability. By using put and call options, investors can lock in specific exchange rates and protect themselves from potential losses if the currency's value declines.