Question: 8.10) Which five statements regarding currency options are true? A The seller (writer) of an option has potentially unlimited gains. B A Long EUR Call
8.10) Which five statements regarding currency options are true? A The seller (writer) of an option has potentially unlimited gains. B A Long EUR Call option incorporates the right to sell EUR. C A Long EUR Call option incorporates the obligation to buy EUR. D Options can have different strike prices and hence varying premiums. E The buyer (holder) of an option has potentially unlimited gains and limited losses. F When used for hedging, the potential gains from the option are used to compensate possible losses in the underlying base transaction. This is why an exporter will always hedge with a Long EUR Put option. G Hedging can only be done with long options. However, hedgers may sell short options to reduce hedging costs. H A EUR Long Call option is always also a USD Short Put option. I Options have a bid and an ask quote for short and long positions. Please elaborate and explain.
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