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The amount paid in US is $298,995
This is a payment and therefore PUT.The exam that we did, that was a receipt, therefore that is a CALLMission, i don’t think you ever got what i was trying to say.
It’s a put bcz we’re selling the £ to buy the $. And not bcz it’s a payment.
The exam has some tricks up his sleeves. You should know that.
In exam it’s put again, bcz the contract currency is € and we’re selling them to buy the $.(since it’s a receipt).
If you still don’t get it, i told u mock 1 qs 2 available for understanding purposes. But since you don’t like the qs, best of luck.
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I think you are taking tooooo much time on this concept, for ( put and buy) the sitution is a matter of quite thinking , now i have a payment to pay it in $ which it is not home currency , so i have to sell £ to buy $
Since i will sell my currency so it is a put option,
The point is that the contract is in my home currency but the primium is in $ , so i will use tge rate to change the premium ,
But finalllly it is a PUT optionif u are paying in the future we use put option but if we are receiving in the future like in the exam we use call option.
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The contract is in £ , so you start by buying the contract , the at the due date you will SELL the contracts to buy $ to pay your payment so you sell contract that mean put
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Look what you will do by the contract
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are u buying or selling the currency in which the option is denominated? once u answer this question then you know if its a call/put. in the exam it was a put option (€125000 contract size, we receive € but want $, hence we SELL €)
People, i have trying to explain them this concept, That you always look at the contract currency.
But they just don’t seem to understand. Simply because they have created a trend/patter in their by minds by looking at a those qs in the exam kit which have the contract currency in their HOME currency. And so have crammed the answer’s and steps.
I have tried my best to make them see the logic. But have failed miserably.
Best thing to do now is just to leave them to the way the see fit.
Mohammad, I can see shades of your exam in mine = hopefully the good parts of our papers will pull us through because i believe it sometimes comes down to the quaetions on the day.
Could anyone give me the mark allocation for each of the first three questions – I wanna ry and predict my mark.
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