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Hi all,
In short note, chapter 20, example 6 I have some concerns
– In section a), where does 400 in calculation of Premium come from?
– In section b), how to calculate Profit on option?Thank you very much,
Hi all,
An other question on Example 1, chapter 19, if the exchange move in our flavour the we will throw away the option and covert at whatever the spot rate happen to be.
So in (a), we must use the spot rate of 1.5180, not 1.15190 as the answer.1. They are options on 3 month futures and so we divide by 4 (because there are 4 three-months periods in a year) and divide my 100 because they are %’s.
2. The profit on the option is the difference between the futures price and the exercise price, again divided by 400.
I work through all of this in my free lectures and you cannot expect me to type out all my lectures here 🙂
It is pointless to use the notes without watching the lectures – they are lectures notes, not a Study text. It is in the lectures that I work through all the examples and explain and expand on the notes.
If you are not watching the lectures for any reason then you need to work through a Study Text from one of the ACCA approved publishers.Second question:
You are correct – it should be at 1.5180 and I will have the printed answer corrected. Thank you.
(However I do show it correctly in the lecture working through this example.)
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