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What is the payoff of this contract at expiration

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Reference no: EM132919768

Question - You hold 1 contract on a 132 September Call option on British pound. The premium of the contract is $120 per contract. The contract size is GBP 10,000.

Suppose at the expiration date, the spot rate is S(USD/GBP)=1.33. Answer the following questions.

(1) Is this Call option "In-the-money" or "Out-of-the-money"?

(2) What is the payoff of this contract at expiration?

(3) What is the profit of this contract at expiration?

(4) What is the ROR of this contract if it is exercised at expiration?

(5) Should you exercise or not exercise this option? Why or why not?

Reference no: EM132919768

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