Carl Is an Option Writer

question 89

Multiple Choice

Carl is an option writer. In anticipation of a depreciation of the British pound from its current level of $1.50 to $1.45, he has written a call option with an exercise price of $1.51 and a premium of $.02. If the spot rate at the option's maturity turns out to be $1.54, what is Carl's profit or loss per unit (assuming the buyer of the option acts rationally) ?

• A)-$0.01.
• B)$0.01.
• C)-$0.04.
• D)$0.04.
• E)-$0.03.

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Definitions:

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