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And in any case,whether it is a call or a put, wouldn’t that depend on the reverse position as well?
I cud be wrong.
But I’m sure i can defend my perspective.
Just for references, you may want to check out the technical article on exchange traded derivatives. And bpp exam kit qs 84 polytot.
Anyways wish u all the best.
A pleasant good day to you Muhammed. I hope you had a rested night. I am now looking at the answer to Polytot and the answer says it is a call option and the premium paid is 3.35. Have a look at it once more.
Ok Sir, if you say so.
i hope you noticed that it was a pesos receipt !
company in UK.
No futures market for pesos, thus you had to convert them to $.
THE FUTURES CONTRACT WAS DENOMINATED IN POUNDS !!!
Thus we had to BUY the POUNDS, inorder for us to SELL the DOLLARS !!
Therefore A CALL option !!
if you need more clarity, you may come in private chat.
Check out mock 1 qs 2, bpp….. Let me know if you require more qs samples.
or if you want to understand the concept.
It’s pretty simple.
A CALL (in short) is a right to BUY an underlying asset – here the denominated currency under the futures market.
A PUT is a right to SELL … All you need to do is to understand what were dealing with here or rather what you’re gonna trade in at the future date.
I’m officially out.
best of luck mate. cheers.
I don’t understand you, you ask me to look at the question Boltot and it Cleary says a call option and now you are justifying it. Chances are if you look at any other question where it says the trader the. Exporter should payment I’m x currency, it is going to be a call
When a payment is due in a currency (other than a $) its a call
When a receipt is due in a currency (other than a £) its a putOkay, go back to NYC, Casasophia, HYK and Phobos in the BBP kit and tell me what you think. Look at the answers.
Can also look at Autocratic plc in Mock exam 2 in the BBP and Mock exam three(3), Alec to in the BBP kiit
In my earlier post it should read exporter should receive payment in x, it should be a call
Muhammed, Mock exam I believe is requesting a forward and a futures contract, not an option contract
Mission, pick any qs which u feel is correct.
And I’ll explain you the logic behind it.
I have sent an explanation to you, in private message. I wish that if you get the chance, plz read through it.
As of now pick any qs and you provide me with the details.
All i need is, – whether it’s a receipt or payment ? In which currency? What’s our home currency? And what’s the contract currency! ?
Just giv me the above info and I’ll do for u anything, options or future’s both.
It doesn’t matter if the qs didn’t ask for futures, bcz the CONCEPTS still remains the same. A BUY in futures is a CALL and SELL is PUT.
So just provide me with the above info of any qs you deem worthy.
I request that we move to private chat as this will become an annoyance to others.
Here’s my whatsapp number +255686703579.
I am not disputing the buying selling of call and put as you mentioned. But have you noticed all the exercises I asked you to look at, not one departed from how I defined a call and a put?
Hi guys, you aren’t annoying us, we also were taking this exam and we’re very interested what it was all about. Considering that even having the text of the exam question it is not crystal clear what was necessary to do) of course it’s more difficult if you don’t have the question text but in any way there should be the same logic behind forex risk questions. As for me I used call, the logic: we will need dollars in some time, so you’ll buy them now. It’s interesting, I remembered it and it was rather simple before this question, you look in what currency contract size and think what they will do with this currency, somehow in this question contract size is in “opposite” currency, which was rather uncomfortable).
Still, goodluck to everybody!Nati, building upon what you said. You’ll consider what currency the contract is in and then decide what to do.
You were receiving € and the contract was in €.
So ofc you’d hav to Sell the € to buy the $ and thus making it a PUT option.
Mission the qs ur talking about, plz notice that they all have the contract currency denominated in the Home currency.
So as for autocrate, ur gonna make a payment in $ and contract is in £.
Therefore you wud SELL the £ to BUY the $ and thus making this a PUT ! (Tell me if they didn’t do that !)Ok, try to look at it from this way.
Firstly correct me if I’m wrong.
In the exam. We were receiving € and our home currency was $. Yes ?Second, was the contract denominated in €125,000 or $125,000 ? I think €.. but i myt hav forgotten.
Third, did you notice that in the qs of polytot, the contract currency was the home currency(£) and we were receiving $ !
So if all the above are correct, then it stands to reason the following:
For understanding purposes, I’m gonna assume that our home currency is $ and the foreign currency is the €.
So In a receipt, if contract is in $(home). I’m going to BUY. Simply bcz I’ll receive € and thus will need to exchange them for $, by selling to the bank the € and buying $ !
Hence CALL option.**what’s happening in polytot qs.NOTE what determines your buy and sell is the contract denominated currency.
Thus if in receipt, the contract was of €. Now here we wud SELL. Same logic applys as above.
Thus it becomes a PUT option.
**what i think happened in exam.You told me look at qs on Kenduri, casasophia, alecto, phobos, CMC, POLYTOT.. all of these qs have their contract currency as THE HOME CURRENCY! Correct me if I’m wrong.
However, mock exam 1 qs 2 – Retilon plc.. the contract is in the Foreign currency.
Make out the differences now.You have reason, and it’s great that we discuss it here. But now I really don’t know how it was necessary to solve, from the currency of contract size or from the logic of the situation itself), I remember that I use the rate to get the least amount after change euros into dollars. It’s a pity that we don’t have the question text, it could have helped. Hope that the examiner will crarify it in his report, think that the examples of the providers can’t be 100% relevant. There is no long to wait, 18 January, hope for best for everybody
hey guys, i didnt choose the exchange risk question because i later found out that the investment appraisal and securitization was a give away. however i chose the risk question before spotting the investment appraisal and i even attempted it but later scratched and cancelled it. reason because there was no future spot rate and i got confuse as to how to use the unexpired basis to get future futures price i tried to make an assumption to use the forward rate as the future spot rate but got a weird answer. i didnt have confidence in what i was doing and come to think of it it was worth i think 12 marks, there was crazy 13 mark theory which i never heard of so i decided to discard the whole question. its now im realising its lock in rates that should be used.
but i could remember, i arrived at the option premium and it was in euros already and not dollars, i was amaized cuz iv never seen such scenario.. and also there was something weird on the contract sizes i cant remember again but i think it was in the other currency dollars not the euro currency. the risk questuon was a disaster this time around and i still wonder why guys didint take the easy securitization and investment appraisal. one can easily score 15 in both but anyway i hope i did enough to pass 50.
good luck to everyone also
Muhammed, still don’t know what you are trying to say.Look at NTC in the BBP kit. The company is a UK multinational company and the payment in question was in US dollars and that is a put option. Mock exam I question two is not a good example.
You still havn’t looked a NTC in the BBP. I think you are missing out on some of the concepts.
Okay i will have a look at ntc, but if your concepts are correct, why you do u find mock 1 qs a bad 1 !
Mission, NTC has the contract currency in £ home currency. And it clearly also states in the answer it’s a PUT bcz they have to SELL £ and BUY $ !!
How is this not consistent with all that i have been saying?
If i had the option to attach a pic, I’d hav sent u the screen shot !
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