Your US company has a payment due of €7,000,000 next year. Your CEO wants to implement an options hedge. Should you buy a call or put? Both the call and put strikes are $1.15/€. The call costs $0.02/€ and the put costs $0.04/€. What is the amount of dollars you will pay (factoring in the profit/loss of the option) if the spot rate finishes at $1.20/€ next year?

Answer rating: 100% (QA)

To determine whether to buy a call or put option for hedging you need to consider the expected futur... View the full answer