John is a Forex trader. He focuses principally on the Singapore dollar

Question: John is a Forex trader. He focuses principally on…

John is a Forex trader. He focuses principally on the Singapore dollar/ us dollar (S$/$) cross-rate. The current spot rate is S$1.44/$. After considerable study, he concludes that the exchange rate, in the coming 180 days, will probably be about S$1.50/$. He has the following options on the Singapore dollar to choose from:

Option Strike Price Premium
Put on S$ S$1.4700/$ S$0.003/$
Call on S$ S$1.4700/$ S$0.004/$

Discuss whether he should buy a Put on S$ or Call on S$, and what would be his net profit if the spot rate at the end of the 180 days is indeed S$1.50/$.

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jagguarpaw January 17, 2017 0 Comments