Hi, I find it's difficult to understand the option hedging. Would someone explain the following questions for me?
1. Say it's Dec 1, I want to borrow $100 two month later(Feb 1 next year) and pay back on May 31 (total period is 4 months). The interest rate is keeping growing, so I want to by options (the options is sold at $10 per contract on market). So what kind of options do I need (Dec or March)? and how much?
I see some questions are solved like this: 100/10=10 contracts
and somes like this: 100/10*(4/3)=13 contracts
2. If I need to pay in Euro, 100Euro on Feb 1. and I want to make currency hedging with currency option. The contract size is also 10Euro. What kind of options do I need (Dec or March)? and how much?
Thank you !
1. Say it's Dec 1, I want to borrow $100 two month later(Feb 1 next year) and pay back on May 31 (total period is 4 months). The interest rate is keeping growing, so I want to by options (the options is sold at $10 per contract on market). So what kind of options do I need (Dec or March)? and how much?
I see some questions are solved like this: 100/10=10 contracts
and somes like this: 100/10*(4/3)=13 contracts
2. If I need to pay in Euro, 100Euro on Feb 1. and I want to make currency hedging with currency option. The contract size is also 10Euro. What kind of options do I need (Dec or March)? and how much?
Thank you !
