Profit loss for the buyer of a call option
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“At the money”. Strike price. “Out of the money”. “In the money”. Unlimited profit. Limited loss. Break-even price. Profit & Loss for the Buyer of a Call Option. Profit (US cents/SF). + 1.00. + 0.50. 0. Spot price (US cents/SF). 57.5. 58.0. 58.5. 59.0. 59.5. - 0.50. - 1.00.

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Profit & Loss for the Buyer of a Call Option

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Profit loss for the buyer of a call option

“At the money”

Strike price

“Out of the money”

“In the money”

Unlimited profit

Limited loss

Break-even price

Profit & Loss for the Buyer of a Call Option

Profit

(US cents/SF)

+ 1.00

+ 0.50

0

Spot price

(US cents/SF)

57.5

58.0

58.5

59.0

59.5

- 0.50

- 1.00

Loss

The buyer of a call option on SF, with a strike price of 58.5 cents/SF, has a limited loss of 0.50 cents/SF at spot rates less than 58.5 (“out of the money”), and an unlimited profit potential at spot rates above 58.5 cents/SF (“in the money”).


Profit loss for the writer of a call option

“At the money”

Strike price

Break-even price

Limited profit

Unlimited loss

Profit & Loss for the Writer of a Call Option

Profit

(US cents/SF)

+ 1.00

+ 0.50

0

Spot price

(US cents/SF)

57.5

58.0

58.5

59.0

59.5

- 0.50

- 1.00

Loss

The writer of a call option on SF, with a strike price of 58.5 cents/SF, has a limited profit of 0.50 cents/SF at spot rates less than 58.5, and an unlimited loss potential at spot rates above (to the right of) 59.0 cents/SF.


Profit loss for the buyer of a put option

“At the money”

Strike price

“In the money”

“Out of the money”

Profit up

to 58.0

Limited loss

Break-even

price

Profit & Loss for the Buyer of a Put Option

Profit

(US cents/SF)

+ 1.00

+ 0.50

0

Spot price

(US cents/SF)

57.5

58.0

58.5

59.0

59.5

- 0.50

- 1.00

Loss

The buyer of a put option on SF, with a strike price of 58.5 cents/SF, has a limited loss of

0.50 cents/SF at spot rates greater than 58.5 (“out of the money”), and an unlimited profit potential at spot rates less than 58.5 cents/SF (“in the money”) up to 58.0 cents.


Profit loss for the writer of a put option

Strike price

Break-even

price

Limited profit

Unlimited loss

up to 58.0

Profit & Loss for the Writer of a Put Option

“At the money”

Profit

(US cents/SF)

+ 1.00

+ 0.50

0

Spot price

(US cents/SF)

57.5

58.0

58.5

59.0

59.5

- 0.50

- 1.00

Loss

The writer of a put option on SF, with a strike price of 58.5 cents/SF, has a limited profit of

0.50 cents/SF at spot rates greater than 58.5, and an uanlimited loss potential at spot rates

less than 58.5 cents/SF up to 58.0 cents.


Option pricing and valuation

Strike Price of $1.70/£

-- Valuation on first day of 90-day maturity --

5.67

Total value

4.00

3.30

1.67

Time value

Intrinsic

value

Option Pricing and Valuation

Option Premium

(US cents/£)

6.0

5.0

4.0

3.0

2.0

1.0

0.0

1.66

1.67

1.68

1.69

1.70

1.71

1.72

1.73

1.74

Spot rate ($/£)


Exhibit 7 1 mexican peso futures us peso cme

Exhibit 7.1 Mexican Peso Futures, US$/Peso (CME)


Exhibit 7 2 currency futures and forwards compared

Exhibit 7.2 Currency Futures and Forwards Compared


Exhibit 7 3 swiss franc option quotations u s cents sf

Exhibit 7.3 Swiss Franc Option Quotations (U.S. Cents/SF)


Exhibit 7 4 buying a call option on swiss francs

Exhibit 7.4 Buying a Call Option on Swiss Francs


Exhibit 7 5 selling a call option on swiss francs

Exhibit 7.5 Selling a Call Option on Swiss Francs


Exhibit 7 6 buying a put option on swiss francs

Exhibit 7.6 Buying a Put Option on Swiss Francs


Exhibit 7 7 selling a put option on swiss francs

Exhibit 7.7 Selling a Put Option on Swiss Francs


Profit loss for the buyer of a call option

Exhibit 7.9 The Intrinsic, Time, and Total Value Components of the 90-Day Call Option on British Pounds at Varying Spot Exchange Rates


Exhibit 7 10 foreign exchange implied volatility january 31 2002

Exhibit 7.10 Foreign Exchange Implied Volatility, January 31, 2002


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