CMC Co (Jun 14)

Hi Sir John Moffat,

Sir, I can correctly calculate basis as -0.0008 after 4 months using this I can also calculate the futures lock in rate as 1.0651. And when I do a back calculation I’m able to get the spot rate as 1.0643 (1.0651+(-0.0008)). When I use this for futures calculation I get CHF 4,750,728 which approx matches with the answer key.

But when I use this to calculate the options @ 1.06 my answer doesn’t match with the answer key. I’m performing the following calculation:
Premium: 96,474
Since the option will not be exercised, I convert the transaction at my spot rate: 5,060,000/1.0643 = 4,754,299. This gives a total cost of 4,850,773. But if I add the loss of option (19,191) (which shouldn’t be added since I’m not exercising the option) my answer approximately matches.

Sir, can you please help me what’s wrong here?