Assume that Mr. Binda is a speculator who buys a 90-day British Pound call option with a strike price of $27.02. Assume one option contract specifies 10,000 units and the current spot price as of that date is $26.87. Mr. Binda pays a premium of $0.05 per unit for the call option and no other charge (such as brokerage fee). Just on the expiration date, the spot rate of a pound reaches $27.18.
Required:-
a) Determine the profit or loss if the option is exercised,
b) Determine the value of the call option lithe option is exercised.
initial price
price after call option
profit
b)
Comments