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Dear John,
For the Options contract, I’ve a bit confuse.
Based on my understanding, when we need to pay (purchase) then we need to buy local currency so that we can sell foreign currency to set local currency.In this Qs, Nutourne Co’s treasury department is currently dealing with a sale to Swiss customer of CHF 12.3 mil and the customer will pay for the equipment on 31 May 20X9. For this, since we are receive CHF then we need to sell $ so that we can buy CHF to set $.
When I check the answer and the answer is using Put options. Would you mind to explain on this?
Thank you.
Nutourne is a US company. It’s going to be receiving CHF 12.3 million.
You should have noticed that the Contract Size is in CHF (CHF 125000).
Eventually we need USD equivalent as we are a US company. Therefore we SELL (Put Options) 98 CHF 125000 Contracts to get USD receipts.
Dear Ashwin,
Thanks for your explanation. Now, I think I get it clear where I went wrong.
Thank you.
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