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Assume that you had speculated the day of DC1 by selling put options that specify 1 million units of the foreign currency. If puts are expiring, the counter-party on your contract exercised the contract at the day of DC2 if it was feasible to do so. If puts have time value you would have to cancel them at market prices. What would be your profit or loss after considering the premium you received from selling the put option? Calculate your results for the OTM, ATM and ITM options. Please report the profit/loss before and after commissions.

CD1 DATA

1. Currency to hedge		Canadian Dollar
1a Currency pair formed with the US dollar (as seen in OANDA, FXCM)		USD/CAD
1b Date when hedge (trading) will be closed and all the calculations done		Friday, February 17, 2017
1c Is this a direct quote in the spot market? (Y/N)		N
2. Exchange rate of the currency as typically quoted in FX markets. Use the SPOT price from the Investing.com site		BID	ASK
		1.3022	1.3024
2a Express the price as a direct quote (value of one unit of that currency in dollars)		0.7678133	0.7679312
3. Three or six-month future rate as of this date (use whatever period covers the second data collection period) Report the settlment price reported on the CME Group website		0.76815
Expiration month of future contract		MAR 17
. Specify the size of the future (option) contracts		100000
4. Forward points observed on this date. Use the Investing.com website for information. Select data for 1W. Students doing USDJPY must use an appropriate factor to convert pips.		BID	ASK
		-1.49	-1.21
		Horizon for Fwd quotes	2 weeks
5. Use the CME group website to obtain option price data.		MAR 17
Specify the expiration month on the CME options that will cover the period you are interested in hedging
		Strike	Premium
5a. Choose a call option that is in the money and obtain its premium		7600	1.18
5b. Find the call option that is at the money and obtain its premium		7700	0.59
5c. Choose a call option that is out the money and obtain its premium		7800	0.24
6. Use the CME group website to obtain put option price data.
Use the same expiration month you chose for call options		Strike	Premium
6a. Choose a put option that is in the money and obtain its premium		7800	1.42
6b. Find the put option that is at the money and obtain its premium		7700	0.77
6c. Choose a put option that is out the money and obtain its premium		7600	0.37
7. Use the Global Rates website to identify the LIBOR rates		LIBOR rates
USD rate for the horizon selected		0.77556 %
Foreign currency rate for the horizon selected		0.96000%

CD2 DATA

1. Name of the currency to hedge		Canadian Dollar
1a Name of the currency pair formed against the US dollar (OANDA, FXCM) (OANDA, FXCM) (OANDA, FXCM)		USD/CAD
1b Is this a direct quote in the spot market? (Y/N)		N
2. Exchange rate of the currency as typically quoted in FX markets		BID	ASK
Use the last quote of that day/week.		1.3094	1.3096
2a Express the price as a direct quote (value of one unit of that currency in dollars)		0.763592	0.763709
3. Price of the futures contract from the CME Group website		0.76325
Expiration month of future contract		MAR 17
4. Use the CME group website to obtain call option price data.		MAR 17
This is the expiration month that you are using for the options
		Strike	Premium
4a. Obtain the premium for the call option with this strike price		7600	0.63
4b. Obtain the premium for the call option with this strike price		7700	0.19
4c. Obtain the premium for the call option with this strike price		7800	0.04
5. Use the CME group website to obtain put option price data.
		Strike	Premium
5a. Obtain the premium for the put option with this strike price		7800	1.71
5b. Obtain the premium for the put option with this strike price		7700	0.86
5c. Obtain the premium for the put option with this strike price		7600	0.31

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