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Sir i am clear about gain or loss in future,as we sold for 96.16 now if the price has gone to 96.02 then we can buy now and make profit.Hope i am correct but i am confusing in option when to exercise and when not. Please clearify Thanks
One more question can we take any combination for collar i mean can not we buy call and sell put.
And why r we not buy put option 96.50 and pay premium .581 and sell call for 96 and receiving premium of .391 and we end up paying less premium. Please help me.ThanksIf exercising the option gives a gain then you will exercise. If a loss, then you won’t exercise.
Buying put options fixes the maximum interest rates. So at 96.50 it fixes a maximum rate of 3.5%.
Selling a call will fix a minimum rate – but this would have to be less than 3.5% which means an exercise price of more than 96.50
Sir in this Alecto question for option exercise price is 96 and future price is 96.02
They r not exercising option,is it because with exercise price we r getting interest rate 4% and with future we r getting interest rate 3.98 as we r borrowing money so we want less rate but exercise price giving worse rate,so not exercising, is my understanding right or there is other way to look,please clarify.
In same question in collar
In sell call they have exercised and that says loss of 48100 my question is why was it exercised if there was loss.
ThanksSorry 🙁
If they sell a call, then it is the buyer who decides whether to exercise or not.
The buyer will exercise if they are going to make a profit, which means that we will make a loss.(That is why it creates a bottom limit for us – a minimum rate)
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