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Hi. In BPP revision kit (AFM) Q.37 Massie, for the answer, in the part “using a collar”, under the “sell put” column, the exercise price is 96.50 and the futures price is 95.74. The “exercise option” is “yes”. If it’s a “yes”, why there is no gain in basis points, and the loss on exercise of 95,000 is incurred instead?
Thank you! 🙂
They have sold the option and so it is not the company who decides whether or not to exercise it but the person who bought the option!
They will exercise it and make a gain, but since we sold it we make a loss when they exercise.
Have you watched my free lectures on collars?
I see. I will watch your free lectures on collars to gain more understanding..
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