A trader who is purchasing a call option on foreign currency should do so before the domestic interest rate rises.

Question

Quizplus · Accepted Answer

When domestic interest rates rise, the value of the domestic currency generally increases, making the foreign currency more expensive to purchase. This can decrease the potential profit of purchasing a call option on foreign currency, making it advantageous to do so before the domestic interest rate rises.

A Trader Who Is Purchasing a Call Option on Foreign