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Calculate apex gains and losses on the call option position

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Reference no: EM133157773

Question - Apex Corporation must pay its Japanese supplier ¥125 million in three months. It is thinking of buying 20-yen call options (contract size is ¥6.25 million} at a strike price of $0.00800 to protect against the risk of a rising yen. The premium is 0.015 cents per yen.

Alternatively, Apex could buy 10 three-month yen futures contracts {contract size is ¥12.5 million) at a price of $0.007940 per yen. The current spot rate is ¥1 = $0.007823. Suppose Apex's treasurer believes that the most likely value for the yen in 90 days is $0.007900, but the yen's range could be as high as $0.008400 or as low as $0.007500.

Required - Calculate Apex's gains and losses on the call option position and the futures position within the range of expected prices. Graph your results {a rough sketch is OK}. Ignore transaction costs and margins.

Reference no: EM133157773

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