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Determine the total amount of profit or loss in thb

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Six months ago, you sold a put option on 40000 Canadian Dollars (CAD) with an expiration date of six months. You received a premium of 3 Thai Baht (THB) per unit on the put option. The exercise price was 23.85 THB. Assume six months ago, the spot rate of CAD was 23.90THB, the six-month forward rate exhibited a discount of 2%, and the six-month futures price was the same as the six-month forward rate. From six months to today, the CAD appreciated against THB by 3 percent. Today the put option will be exercised (if it is feasible for the buyer to do so).

Required

A. Determine the total amount of your profit or loss in THB from your position in put option.

B. Now assume that instead of taking a position in the put option six months ago, you sold a futures contract on 40000 CAD with a settlement date of six months. Determine your profit or loss in THB.

C. If six-month forward rate exhibits a premium of 4% instead of 2% discount, how much the total amount of your profit or loss in THB in the put option will change from your position?

Reference no: EM132613930

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