1 : A trader writes a December put option with a strike price of $50. The price of the option is $4. Under what circumstances does the trader make a gain?

2. A U.S. company expects to have to pay 10 million Mexican pesos in six months. Explain how the exchange rate risk can be hedged using (a) a forward contract and (b) an option

3.The CME Group offers a futures contract on long-term Treasury bonds. Characterize the investors likely to use this contract.

4. Options and futures are zero-sum games. What do you think is meant by this statement?

5. USD/JPY spot rate is 106.08 as of September 2020. If forward points are -61.93, calculate the one year forward USD/JPY FX rate. What does this tell us about interest rates in Japan and in the US?

6. Suppose that USD-sterling spot and forward exchange rates are as follows:

Spot	1.5580
90-day forward	1.5556
180-day forward	1.5518

What opportunities are open to an arbitrageur in the following situations?

1. A 180-day European call option to buy 1 for $1.52 costs 2 cents.
2. A 90-day European put option to sell 1 for $1.59 costs 2 cents