Consider a "SFr Dec 7000 call" selling on the Chicago Mercantile Exchange (CME) at a price of $0.0180/SFr. Each CME Swiss franc contract is worth SFr125,000. What would be the profit on an investment in this option if the spot rate at expiration is $0.7320/SFr?

Question

Quizplus · Accepted Answer

The cost of the call option is $0.0180/SFr x SFr125,000 = $2,250. 
At expiration, if the spot rate is $0.7320/SFr, the option will be worth maximum [($0.7320/SFr - $0.7000/SFr) x SFr125,000] = $4,000. 
Thus, the profit on the investment would be $4,000 - $2,250 = $1,750.

Consider a "SFr Dec 7000 Call" Selling on the Chicago