Selling Currency Put Options
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Question: Mark Jones sold a put option on Canadian dollars for $.03 per unit. The strike price was $.75, and the spot rate at the time the option was exercised was $.72. Assume Mark immediately sold off the Canadian dollars received when the option was exercised. Also assume that there are 50,000 units in a Canadian dollar option. What was Mark's net profit on the put option?
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Solution Summary
In just over 100 words, this solution details the concept of a put option and identifies how to calculate net profit. All calculations which are required are shown.
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Net purchase price to Mark due to exercise of Option: Strike Price- Premium Received for selling the put option
= .75- .03= .72
As assumed, that he ...
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