Call & Put Options – Graph Analysis PDF

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Call & Put Options – Graph Analysis
Contingency Graph for Purchasers of British Pound Call Options
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Name: Vu Thanh Mai Student ID: 1616260050

Call & Put Options – Graph Analysis Contingency Graph for Purchasers of British Pound Call Options The net gains to a buyer of a British Pound put option with an exercise price of $1.50 and a premium of $0.30 per unit. - If the future spot rate is above $1.50, the option will not be exercised. - If the future spot rate is $1.48, the put option will be exercised, however, considering the premium of $0.3 per unit, there will be a net loss of $0.1 per unit. - If the future spot rates is less than $1.47, the buyer of the put option will earn a positive net gain, and the option will be exercised. The break even point is $1.47, since this is the future spot rate that will generate $0.30 per unit from exercising the option to offset the $0.3 premium.

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If the future spot rates is less than $1.50, the net gain to the seller would be the premium of $0.2 per unit, the option would not be exercised. If the future spot rates is $1.51, the seller would lose $0.1 per unit on the option transaction. However, this loss will be more than offset by the premium of $0.2 per unit received, resulting in a net gain of $0.1 per unit.

If the future spot rates is less than $1.50, the option will not be exercised. The break even point is $1.47, at which the seller is broke even with the loss on transaction fee. If the future rate is more than $1.50, the option will be exercised....