Question

Randy Rudecki purchased a call option on British pounds for $0.07 per unit. The strike price was $1.45 and the spot rate at the time the option was exercised was $1.46. Assume there are 30,600 units in a British pound option. What was Randy's net profit on this option?

Answer 1

$30,599.94

Step-by-step explanation:

Profit per unit on exercising the option = $1.45 - $1.45 = $0.01

Premium paid per unit = $0.07

Net Profit per unit = Profit per unit on exercising the option - Premium paid per unit

Net Profit per unit = $0.01 - $0.07

Net Profit per unit = -$0.06

Net profit per option = 30,600 units * -$0.06

Net profit per option = $30,599.94