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hello sir,
I just read yhe answer of the Q1 of sample exam Mar/June 2016 and I have question about the futures and options contract.
For the futures, requirement gives the inf.
currency futures(quotation:€ per $1)
march futures €0.8638
june futures €0.8656
is it right to assume it’s the price of the futures on 1March 2016? If so, the difference could be used to calculate the basis, but I don’t understand that without spot rate how can we calculate the rate on the day of receiption? the answer just added up the march futures with 2/3 of the basis but I think the spot rate on 1 march is quite differenet with the futures price? and the answer gives only the expected receipt on money market without calculating the profit/loss on futures market and I feel totally confused about it.I think it incomplete.
when it comes to the option contract, what is the quickest way to determine whether I buy/sell a call/put option? You once said in your lecture that borrower will always sell futures and buy put option and what about currency futures and options?
will the currency used in contract size represent what currency future I buy/sell?Sorry to post such a long question and look forward to see your reply.
Thank you very much.Yes – it right to assume that the futures price is ‘todays’ price.
The answer has calculate the lock-in rate (and there are free lectures on this). For the lock-in rate you don’t need to know the spot rate on the date of the transaction.
As to whether you buy a put option or a call option depends on whether you will be selling or buying the contract currency (the currency that the contract size is quoted in).
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