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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › exercising option
Sir can u please make this clear that exercising option depends on what i mean if the interest rate goes up or the future price goes up ,means when do we exercise the option. Many thanks
You will exercise the option if you will make a profit on it.
So if you have an option to buy futures at a fixed price then you will exercise it if the actual price of the future is higher. (You buy at the fixed price and then immediately see it at the higher price).
The price of the future gets higher if the interest rate gets lower (because the futures price is 100 – interest).
Vice versa if you have an option to see futures.
Thank u sir.
You are welcome 🙂