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selling a put option.

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Mr. Curtis was enlightened by the information you provided but would like to learn if there are alternative methods available for dealing with currency risks. He requests that you research material from the Library and/or the Internet to construct a memo on the differences between buying a call option, selling a call option, buying a put option, and selling a put option.

Also, give an example of a business scenario in which it would be appropriate to use each of the contracts (a put and a call contract). If, instead, you chose to use the forward market, assume you were going to receive 100,000 Japanese yen in 6 months and the current exchange rate was 5 yen equals 1 U.S. dollar. How many yen would you sell or buy in the forward market? Be sure to cite all references using the appropriate citation format.

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Mr. Curtis was enlightened by the information you provided but would like to learn if there are alternative methods available for dealing with currency risks. He requests that you research material from the Library and/or the Internet to construct a 2-3 page memo on the differences between buying a call option, selling a call option, buying a put option, and selling a put option. Also, give an example of a business scenario in which it would be appropriate to use each of the contracts (a put and a call contract). If, instead, you chose to use the forward market, assume you were going to receive 100,000 Japanese yen in 6 months and the current exchange rate was 5 yen equals 1 U.S. dollar. How many yen would you sell or buy in the forward market? Be sure to cite all references using the appropriate citation format.

TO: Mr. Curtis.

FROM: Financial Manager,

DATE: 2nd January, 2012

SUBJECT: Call and put options.

The memo has been written with the intention of ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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