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Good day!
I do not understand how closing position on option needs to be estimated.
For example in 12/13 Awan Co closing position on put option equals expected future price on that date (taken from future part of answer).Why cant I use LIBOR at closing date as an estimate of closing option position?
Please help if possible.
thanks in advance.Interest rate options are the right to buy or sell futures at a fixed price on a future date.
Since they are buying call options, it means that if they exercise them then they will buy futures at the exercise price and immediately sell them at whatever the futures price is.My free lectures on interest rate risk management will help you with this.
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