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in calculating of no:of contracts in Awan ,numerator is 4months? is it the duration from nov to feb (nov,dec,jan,feb) do we include feb since its 1st of feb?
4 is the number of months that the money will be invested. From 1 February to 1 June (so Feb, Mar, Apr, May).
hi John,
interest rate increase by 0.9%Strike price 94.5
Option Now Feb 01.
Interest rate 4.09% 4.9900%
Future price 95.91 95.01
Actual price 94.5 sell price 94.45 Buy price
1.41 0.56Strike price 95
Now Feb 01.
Interest rate 4.09% 4.9900%
Future price should be 95.91 95.01
Price of option 95.00 Buy 94.65 Sell
0.91 0.36can you please explain the interest rate option calculation in this question of Awan company
I am a bit puzzled by your figures.
The options are options on futures. The interest rate either goes up to 4.99%, in which case the futures price will be 94.55 on the exercise date (as shown in the workings for the futures).
Alternatively the interest rate goes down to 3.19% in which case the futures price will be 96.35 (again, as shown in the workings for the futures).
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