Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Put / Call Option
- This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
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- August 23, 2021 at 9:31 am #632604
Good Morning Sir
Just wanted some clarification on the below if that’s okay
In Gogarth March / June 21 as the exercise price is quoted US / MR we need to use a call option to buy MR to receive dollars, is that right?
Likewise in Washi September 18 as the option is JPY / Euro we need to use a put option to receive Euro’s by selling Euro’s
Understanding that in Washi as it’s direct method rec fx use lhr and gogarth indirect method use right hand rate for forwards / futures etc
I am a bit confused when to use a put or a call option
August 23, 2021 at 5:01 pm #632642In Washi, they are receiving Euros. Therefore they need to sell Euros. The option contract size is quoted in Euros and therefore they need options to sell i.e. put options in Euros.
In Gogarth they have a new receipt in $’s. Therefore they need to sell $’s and buy Ringgit. The option contract size is quoted in Ringgit and therefore they need options to buy i.e. call options in Ringgit’s.
I really do suggest that you watch my free lectures on the management of foreign exchange risk because I do explain all of this in detail 🙂
August 24, 2021 at 7:23 pm #632795Thank you so much John for your help that has cleared perfectly, yes I agree but time is not on my side!
August 25, 2021 at 8:58 am #632839You are welcome 🙂
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