# Currency bull spreads and bear

Currency bull spreads and bear spreads. A call option on dollars exists with a strike price of £0.64 and a premium of £0.04 per unit. Another call option on dollars has a strike price of £0.66 and a premium of £0.03 per unit. (See Appendix 5B in this chapter.)

a Complete the worksheet for a bull spread below. b What is the breakeven point for this bull spread?

c What is the maximum profit of this bull spread? What is the maximum loss?

d If the dollar spot rate is £0.65 at option expiration, what is the total profit or loss for the bull spread?

e If the dollar spot rate is £0.63 at option expiration, what is the total profit or loss for a bear spread?

# Currency Bull Spreads and Bear

Currency Bull Spreads and Bear Spreads A call option on British pounds (£) exists with a strike price of \$1.56 and a premium of \$.08 per unit. Another call option on British pounds has a strike price of \$1.59 and a premium of \$.06 per unit. (See Appendix B in this chapter.)

a. Complete the worksheet for a bull spread below. b. What is the break-even point for this bull spread?

c. What is the maximum profit of this bull spread?

What is the maximum loss?

d. If the British pound spot rate is \$1.58 at option expiration, what is the total profit or loss for the bull spread?

e. If the British pound spot rate is \$1.55 at option expiration, what is the total profit or loss for a bear spread?

# Currency bull spreads and bear

Currency bull spreads and bear spreads. A call option on dollars exists with a strike price of £0.64 and a premium of £0.04 per unit. Another call option on dollars has a strike price of £0.66 and a premium of £0.03 per unit. (See Appendix 5B in this chapter.) a. Complete the worksheet for a bull spread below.

b. What is the breakeven point for this bull spread?

c. What is the maximum profit of this bull spread? What is the maximum loss?

d. If the dollar spot rate is £0.65 at option expiration, what is the total profit or loss for the bull spread?

e. If the dollar spot rate is £0.63 at option expiration, what is the total profit or loss for a bear spread?