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Hi, John. 😉
In doing option (currency/interest rate future), we may select strike price that will give us best position if the currency or interest rate turn Worse against us.
But it will not be the same if the currency or interest rate turn Favourable to us. In this case option with least premium will be the choice.
Thus it raise a question to me, are we suppose to do all strike price instead of doing just the one will give us best position.
There is no best strike price, because choosing one given us a lower worst outcome will have a higher premium cost (and the premium is payable whether or not the option is exercised).
Ideally in the exam you will show what happens for each of the available strike prices. However, most of the marks are for proving that you know how options work. So if you are short of time just show for one of the strike prices (and write that others are available) and you will get more than the half marks you are needing.
Thank you, John.
I do agree there is no best strike price as that will be left to actual rate in future to determine.
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