If you think that the dollar is going to appreciate against the euro,you should
A)buy put options on the euro.
B)sell call options on the euro.
C)buy call options on the euro.
D)none of the options

Question

Quizplus · Accepted Answer

If you believe that the dollar will appreciate against the euro, you can profit from this by purchasing call options on the euro. Call options give the holder the right to buy the underlying asset (in this case, euros) at a predetermined price (strike price) on or before a specified date (expiration date). If the value of the euro increases above the strike price by the expiration date, then the holder can exercise the option and buy euros at the lower strike price, thereby making a profit.

Buying put options on the euro (option A) would be profitable if the euro were expected to depreciate, not appreciate. Selling call options on the euro (option B) would only be suitable for investors who believe that the euro will remain stable or depreciate slightly, but not for those who expect a significant appreciation. Option D is incorrect because one of the above choices is the best option.

If You Think That the Dollar Is Going to Appreciate