An option based hedging strategy is useful if there is an element of uncertainty present in a firm's cash flows. A US firm with an Australian subsidiary is facing a difficult situation. The Australian company won a patent infringement lawsuit two months ago. The case is on appeal now. In two months $($July$)$ the appeal will be heard. If the judgment is granted, the Australian subsidiary will receive $500,000$ Australian dollars $($AUD$).$ This will be wired to the US parent in US dollar $($USD$)$ terms to help cover the expenses of the case. If they lose the appeal, the recovery is lost and they get nothing. Current July puts on AUD are trading at a strike price of $79$ cents USD$/$AUD with a premium of $1\mathrm{.}35$ cents US$/$AUD$.$ Each contract is for AUD $50,000.$ The current spot exchange rate is $77\mathrm{.}8$ cents USD$/$AUD$.$ The firm is concerned about losing money converting the AUD to USD so they choose to hedge the cash flow with the July $79$ puts. What position is appropriate for them to take here?

Question $9$ options:

short $50$ July puts

long $10$ July puts

long $100$ July puts

short $10$ July puts