Suppose that instead of using a forward contract, you consider using options. A one-year call option to buy euros at a strike price of $1.25/€ is trading for $0.10/€. Similarly a one year put option to sell euros at a strike price of $1.25/€ is trading for $0.10/€. To hedge the risk of your profits, should you buy or sell the call or the put?
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Home » Business » Suppose that instead of using a forward contract, you consider using options. A one-year call option to buy euros at a strike price of $1.25/€ is trading for $0.10/€. Similarly a one year put option to sell euros at a strike price of $1.