$35.$ Speculating with Currency Options. Barry Egan is

a currency speculator. Barry believes that the Japanese yen will fluctuate widely against the U$.$S$.$ dollar in the coming month. Currently, one$-$month

call options on Japanese yen $()$ are available with

a strike price of $$\mathrm{.}0085$ and a premium of $$\mathrm{.}0007$

per unit. One$-$month put options on Japanese yen

are available with a strike price of $$\mathrm{.}0084$ and a premium of $$\mathrm{.}0005$ per unit. One option contract on

Japanese yen contains $6\mathrm{.}25$ million. $($See Appendix B in this chapter.$)$

a$.$ Describe how Barry Egan could utilize these

options to speculate on the movement of the

Japanese yen.

b$.$ Assume Barry decides to construct a long strangle in yen. What are the break$-$even points of this

strangle?

c$.$ What is Barry$$s total profit or loss if the value of

the yen in one month is $$\mathrm{.}0070?$

d$.$ What is Barry$$s total profit or loss if the value of

the yen in one month is $$\mathrm{.}0090?$