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For the Armstrong group the co is receiving 25m euro . .so the answer says buy call sell put
SELL PUT. CALL OPTION
Excercise 96.5 97
Futures. 95.74. 95.74
U will excercise this optionBut loss calculated is (76*25*50) =95000
Why is this calculated as a loss. . isn’t it a gain ?
I do not have the Kaplan book – only the BPP Revision Kit.
However I do have all past exam questions, so if it is a past exam question please say which year – then I will be able to answer your problem.
It is the put option that is exercised, and the person who will exercise it is the person who bought the option from us (because we sold the option). They will exercise because they make a gain, but we (i.e. the seller) therefore make a loss.
It may help you to watch my free lectures on collars.
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