Mexican peso futures US$/peso (CME)
Maturity open high low settle change high low open interest
Mar .10953 .10988 ,10930 .10958 ------ .11000 .09770 34,841
June .10790 .10795 .10778 .10773 ------ .10800 .09730 3,405
Sept .10615 .10615 .10610 .10573 ------- .10615 .09930 1,481
All contracts are for 500,000 mexican pesos..
British pount US$/pound (cme)
Mar 1.4246 1.4268 1.4214 1.4228 .0032 1.4700 1.3810 25,605
June 1.4164 1..4188 1.4146 1.4162 .0030 1.4550 1.3910 809
1.if someone sells eight June futures contracts for 500,000 pesos at the closing price quoted above:
a. what is the value of the position at maturity if the ending spot rate is $0.1200/ps?
b. what is the value of the position if the ending spot rate is $0.09899/ps?
c. what is the value of the position if the ending spot rate is $0.1100/ps?
2. a If someone buys 5 june pound futures and the spot rate at maturity is $1.3980/pounds, what is the value of his position?
b. if he sells 12 march pound futures and the spot rate at maturity is $1.4560/pound, what is the value of his position?
c. if he buys 3 march pound futures and the spot rate at maturity is $1.4560/pound what is the value of his position?
d. if he sells 12 june pound futures and the spot rate at maturity is $1.3980/pounds, what is the value of his position/
4.hans believes the swiss franc will appreciate verus the US dollar in the coming three month period. He has $100,000 to invest. The current spot rate is $0.5820/SF, the three month forward rate is $0.5640/SF and he expects the spot rate to reach $0.6250/SF in three months.
a. calculate Han's expected profit assuming a pure spot market speculation strategy
b. calculate Hans's expected profit assuming he buys or sells SF three month forward.
5. Katya B works in the currency trading unit of a bank in Russia her lastest speculative position to profit from her expectation that the US dollar will rise significantly against Japenese Yen. The current spot rate is Y120.00/$. She must choose between the following 90 day options on the japenese yen
Option strike price premium
Put on yen Y125/$ $0.00003/Y
Call on yen Y125/$ $0.00046/Y
a. Should she buy a put on yen or a call on yen?
b. Using your answer to part a what is her break even price
c. Using your answer to part a what is her gross profit and net profit (including the premium) if the spot rate at the end of the 90 days is Y140/$
7. assume a call option on euros is written with a strike price of $0.9400/e at a premium of 0.90000Cents per euro ($0.0090/e) and with an expiration date three months from now. The option is for â?¬100,000. Calculate your profit or loss if you exercise before maturity at a time when the euro is traded spot at:
8. Assume a put option on japenese yen is written with a strike price of $0.008000/Y (Y125.00/$) at a premium of 0.0080cents per yen and with an expiration date six months from now. The option is for Y12,500,000 . Calculate your profit or loss if you exercise before maturity at a time when the yen is traded spot at
a. Let's calculate the value of the position per contract. The closing price for June contracts was $0.10773/Peso. Since you SOLD Mexican pesos futures (a bet that the Mexican peso will depreciate with respect to the dollar), you will make money if the peso falls (less $ per peso) and lose if the peso rises (more $ per peso). In this case, the ending price was $0.1200/peso (at maturity, the price of a future contract is the same as the spot rate), so you lost money. Your profit per peso is:
0.10773 - 0.1200 = -$0.01227/peso
So you lost $0.01227/peso. Since each contract is for 500,000 pesos, then your loss per contract is:
500000*(-0.01227) = -$6,135
Finally, since you sold 8 contracts, the total loss is 8*(-6135) = -$49,080. Therefore, the value of your position is -$49,080.
b. We use the same reasoning as before:
Profit per peso = 0.10773 - 0.09899 = $0.00874/peso
[here you made money, because the peso depreciated]
Profit per contract = 500,000 * 0.00874 = $4,370
Proit per 8 contracts = 4370 * 8 = $34,960
The value of the position is $34,960
c. Again, the procedure is the same. The result we get here is that the value of the position is -$9,080
As a general formula:
Profit for a BUY position = (Ending price - Buying price)*(Contract Size)*(# of contracts)
Profit for a SELL position = (Selling price - Ending price)*(Contract Size)*(# of contracts)
a. If you BUY pound futures, you make a profit if the pound rises (more $ per pound) and lose if the pound falls ...
Currency speculation problems are solved.