Question

You purchase a call option on Swiss Francs (SF) for a premium of $.02, with an exercise price of $1.0325. The option will not be exercised until the expiration date, if at all. If the spot rate on the expiration date is $1.0072, your net profit/loss on one contract containing 10,000 SF units. will be: Group of answer choices $53 -$53 $200 -$200 $530

Answer 1

$53

Step-by-step explanation:

Payoff of the option = Strike price - Stock price at end

Payoff of the option = $1.0325 - $1.0072

Payoff of the option = $0.0253

Profit from the option = Payoff - Premium paid

Profit from the option = $0.0253 - $0.02

Profit from the option = $0.0053

Net profit/loss on one contract containing 10,000 SF units will be:

= 10,000 SF units * $0.0053

= $53 Profit