Why Is a Currency Put or Call Not Profitable to Exercise

question 21

Multiple Choice

Why is a currency put or call not profitable to exercise when it is "at the money"?

• A) because the spot equals the price but the premium is not recovered if it is exercised resulting in a loss
• B) When an option is "at the money," the Exchange will charge a higher fee.
• C) When it is "at the money," the Exchange shuts down trading of the option contract.
• D) The Exchange will use mark to market accounting to record a loss.

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Definitions:

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Articles

A written composition in prose, usually nonfiction, on a specific topic, forming an independent part of a book or other publication.

Dominant Strategy

A unilateral optimal strategy for a player in a game theory scenario, regardless of opponents' actions.

Nash Equilibrium

A concept in game theory where no player can gain by changing their strategy while the other players keep theirs unchanged.