Abdul sold a call option on British pounds for $.05 per unit. The exercise price was $1.80, and the spot rate at the time the pound option was exercised was $1.92. Assume there are 31,250 units in a British pound option contract. What was Abdul’s per unit net profit on the option contract? What was Abdul’s total net profit on the option contract? Calculate the break-even spot rate (at expiration) for Abdul.
i) Abdul sold a call option on British pounds for $.05 per unit. The exercise price was $1.80, and
the spot rate at the time the pound option was exercised was $1.92. Assume there are 31,250
units in a British pound option contract. What was Abdul’s per unit net profit on the option
contract? What was Abdul’s total net profit on the option contract? Calculate the break-even spot
rate (at expiration) for Abdul.
ii) Mike sold a put option on British pounds for $.04 per unit. The exercise price was $1.70, and
the spot rate at the time the pound option was exercised was $1.68. Assume there are 50,250
units in a British pound option. What was Mike’s per unit net profit on the option? What was
Mike’s total net profit on the option? Calculate the break-even spot rate (at expiration) for Mike.
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