Suppose that you are a speculator that anticipates an appreciation of the Singapore dollar (S$). You purchase a call option contract on Singaporedollars. Each contract represents S$25,000, with a strike price of $0.86 and call option premium of $0.02 per unit.Suppose that the spot price of the Singapore dollar is $0.92 just before the expiration of the call option contract. At this time, you call the contract andimmediately sell the Singapore dollars to a bank at the current spot price.Use the drop-down selections to fill in the following table from your (the buyer's) perspective.Note: Assume there are no brokerage fees.TransactionSelling Price of S$- Purchase Price of S$Premium Paid for OptionNet Profit=Per Unit$0.92-$0.86-$0.02Per Contract$23,000$18,400$13,800

Drawing table for the calculation of Net Profit : Per unit Per contract Selling Price 0.92 23000…

Answered: Suppose that you are a speculator that…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Give Answer with calculation and also provide correct and incorrect option explanation
Suppose that you are a speculator that anticipates a depreciation of the Singapore dollar (S$). You purchase a put option contract on Singapore dollars. Each contract represents S$45,000, with a strike price of $0.77 and an option premium of $0.03 per unit. Suppose that the spot price of the Singapore dollar is $0.73 just before the expiration of the put option contract. At this time, you exercise the option, while also purchasing S$45,000 in the spot market at the current spot rate. Assume the seller, after you exercise the put option, immediately sells the S$45,000 on the spot market. Now consider this scenario from the perspective of the individual or firm that sold you the put option. Note: Assume there are no brokerage fees. Use the drop-down selections to fill Transaction Selling Price of S$ - Purchase Price of S$ + Premium Paid for Option = Net Profit the following table from the sellers perspective. Per Unit $0.73 -$0.77 $0.03 Per Contract $32,850 $26,280 $39,420
You enter into a futures contract to buy €125,000 at $1.53 per euro. The spot exchange rate when you enter the contract is $1.63. Your initial performance bond is $6,100 and your maintenance level is $2,400. At what settle price will you get a demand for additional funds to be posted to your account? 1.6596 1.7596 1.8896 1.5004 1.5596 1.6004
A speculator has purchased United States dollar put options, with an exercise price of A$1.30and a premium of A$0.05 per unit.(a) Calculate the break-even price.(b) Calculate the profit or loss of the option for the speculator if the spot rate at the time the speculator considers exercising the options is : (1) A$1.20 (2) A$1.28 (3) A$1.34.(c) What is the maximum profit and maximum loss for the speculator?
(Call Option P/L)Samuel Samosir works for Peregrine Investments in Jakarta, Indonesia. He focuses his time and attention on the U.S. dollar/Singapore dollar ($/S$) cross-rate. The current spot rate is $1.39/S$. After considerable study, he has concluded that the Singapore dollar will appreciate versus the U.S. dollar in the coming 90 days, probably to about $1.44/S$. He is considering trading options to profit and has the following options on the Singapore dollar to choose from: Option choices on the Singapore dollar: Strike price (US$/Singapore dollar) Premium (US$/Singapore dollar) Call on S$ $1.36 $0.066 Put on S$ $1.37 $0.006 Samuel decides to buy call options in Singapore dollars. What is Samuel's (net) profit/loss (in dollars) per option if the spot rate is $1.37/S$ at maturity? Keep the sign and all decimal places. Do not include currency sign in your answer.
(a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR. The trader holds the position until the last day of trading when the spot price is USD1.2939/EUR. This will be the final settlement price because of price convergence. The trader has EUR125,000 for this investment. (i) If the trader had a long position and he was a speculator, calculate his profit or loss for the position above. (ii) If the trader had a short position and he was a speculator, calculate his profit or loss for the position above. (iii) If the trader had a long position and he was a hedger, calculate his profit or loss for the position above. (iv) If the trader had a short position and he was a hedger, calculate his profit or loss for the position above. (b) Discuss factors that you would consider in evaluating the political risk associated before making FDI in a foreign country.
June 2021 Mexican peso futures contract has a price of $0.05197 per MXN. You believe the spot price in June will be $0.05831 per MXN. MXN500,000 is the contract size of one MXN contract. Required: What speculative position would you enter into to attempt to profit from your beliefs? Calculate your anticipated profits, assuming you take a position in three contracts. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes?
Suppose that you are a speculator that anticipates a depreciation of the Singapore dollar (S$). You purchase a put option contract on Singapore dollars. Each contract represents S$40,000, with a strike price of $0.68 and an option premium of $0.02 per unit. Suppose that the spot price of the Singapore dollar is $0.62 just before the expiration of the put option contract. At this time, you exercise the option, while also purchasing S$40,000 in the spot market at the current spot rate. Use the drop-down selections to fill in the following table from your (the buyer's) perspective to determine your net profit (on a per contract basis). (Note: Assume there are no brokerage fees.) Note: Assume there are no brokerage fees. Transaction Selling Price of S$ - Purchase Price of S$ - Premium Paid for Option = Net Profit Per Unit $0.68 -$0.62 -$0.02 Per Contract

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