Advantage or disadvantage from this hedging

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Reference no: EM131814114

Merck Corporation has euro 100 million 90-days receivables; it is concerned about possible depreciation of the euro over the coming 90-days. A December futures put option on euro with a strike price of $1.25 is available, and the premium for it is $0.045 per unit. 90-days later, the spot price turned out to be $1.1800 per euro. Please calculate the # of options required to hedge the receivables, and the advantage or disadvantage from this hedging. There are 125,000 units in each euro currency futures.

Reference no: EM131814114

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