A trader sells a call option with a strike price of $45 for $7. What is the trader's maximum gain and maximum loss? 

 

b)   You own a put option on a Brambles share with an exercise price of $12. The option will expire in exactly six months' time.

    i)  If the share is trading at $9 in six months, what will be the payoff of the put?

   ii) If the share is trading at $18 in six months, what will be the payoff of the put? 

   iii) Assuming that the option costs $0.50, draw a profit diagram showing the profit of the put as a function of the share price at expiration.

 

c)  A U.S. company expects to buy 1 million Canadian dollars in six months. Explain how the exchange rate risk can be hedged using (i) a forward contract; and (ii) an option

Answer rating: 100% (QA)

Answer A Trader that sells call option the maximum gain would be the call ... View the full answer