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Hi John,
I have a doubt regarding this question, it’s about the rate we use to find option premium. For option premium we use 1.1618 to multiply and find out our premium payable in US$.For all other exchanges to convert euro to $ we have used 1.1585. Please clarify why are we taking US$ buying part (1.1618) instead of 1.1585.
Thanks
We are paying the premium.
The premium is quoted in €’s.
When we are selling €’s we use 1.1585, when we are buying €’s we use 1.1618.
(If you were to use 1.1585 instead then you would be paying less, which could not possibly be the case – the whole reason for the spread is so that the bank can make a profit 🙂 )
Hi John, That makes total sense but here we are buying $ if I understand properly as what is being multiplied is the 674,250 EUR x 1.1618. Thanks in advance for the clarification!
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