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Chapter 5: Foreign Currency Options

This template helps students in calculating the call option profits for buyer and seller.
Students need to enter the required information in the input screen (green shaded cells).
Output is automatically updated as information in the input screen is changed.
Please change the spot rate in item 4a, in order to see its impact on the net profit.
Input Screen
Foreign currency in question
2. Option Premium per unit
3. Strike Price
4. Spot rate at the exercise time
4a. New spot rate at the exercise time
5. One unit in option equals
6. Brokerage fee per contract
7. Number of contracts bought

British Pounds
$0.02
$1.45
$1.46
$1.47
31,250.00
$0.00
1

Conclusion:
The higher the assumed spot rate at the time the call option was exercised, the higher would be the net profit. The
contingency graph shows this relationship as well, although there is a maximum loss equal to the premium paid.
OUTPUT SCREEN
Net profit to call option buyer
Selling price of
Purchasing price of
Option premium paid
Net profit

as per item 4
as per item 4a
Per Unit
Per Contract Total
Per Unit
$1.46
$45,625.00
$45,625.00
$1.47
($1.45) ($45,312.50) ($45,312.50)
($1.45)
($0.02)
($625.00)
($625.00)
($0.02)
($0.01)
($312.50)
($312.50)
$0.00

Net profit to put option seller


(not in the original problem)
Selling price of
Purchasing price of
Option premium received
Net profit

as per item 4
as per item 4a
Per Unit
Per Contract Total
Per Unit
$1.45
$45,312.50
$45,312.50
$1.45
($1.46) ($45,625.00) ($45,625.00)
($1.47)
$0.02
$625.00
$625.00
$0.02
$0.01
$312.50
$312.50
$0.00

her would be the net profit. The


ss equal to the premium paid.

Per Contract Total


$45,937.50
$45,937.50
($45,312.50) ($45,312.50)
($625.00)
($625.00)
$0.00
$0.00

Per Contract Total


$45,312.50
$45,312.50
($45,937.50) ($45,937.50)
$625.00
$625.00
$0.00
$0.00

The Contingency Graph for Call Option Buyer


This graph is automatically prepared. Please do not enter any information in this worksheet under any circumstanc

Spot Rate Profit


0.00
-0.02
1.00
-0.02
1.02
-0.02
1.04
-0.02
1.06
-0.02
1.08
-0.02
1.10
-0.02
1.12
-0.02
1.14
-0.02
1.16
-0.02
1.18
-0.02
1.20
-0.02
1.22
-0.02
1.24
-0.02
1.26
-0.02
1.28
-0.02
1.30
-0.02
1.32
-0.02
1.34
-0.02
1.36
-0.02
1.38
-0.02
1.40
-0.02
1.42
-0.02
1.44
-0.02
1.46
-0.01
1.48
0.01
1.50
0.03
1.52
0.05
1.54
0.07
1.56
0.09
1.58
0.11
1.60
0.13
1.62
0.15

$1.45
$0.02

Payoff for Call Option Buyer


0.06
Net Profit Per Unit

The Strike Price =


Option Premium =

0.04
0.02
0.00

0.00

1.06

1.14

1.22

1.30

1.38

-0.02
-0.04
-0.06
Future Spot Rate

1.46

is worksheet under any circumstances

1.46

1.54

1.62

The Contingency Graph for Call Option Seller


This graph is automatically prepared. Please do not enter any information in this worksheet under any circumstanc

Spot Rate Profit


0.00
0.02
1.00
0.02
1.02
0.02
1.04
0.02
1.06
0.02
1.08
0.02
1.10
0.02
1.12
0.02
1.14
0.02
1.16
0.02
1.18
0.02
1.20
0.02
1.22
0.02
1.24
0.02
1.26
0.02
1.28
0.02
1.30
0.02
1.32
0.02
1.34
0.02
1.36
0.02
1.38
0.02
1.40
0.02
1.42
0.02
1.44
0.02
1.46
0.01
1.48
-0.01
1.50
-0.03
1.52
-0.05
1.54
-0.07
1.56
-0.09
1.58
-0.11
1.60
-0.13
1.62
-0.15

$1.45
$0.02

Payoff for Call Option Seller


0.06
Net Profit Per Unit

The Strike Price =


Option Premium =

0.04
0.02
0.00

0.00

1.06

1.14

1.22

1.30

1.38

-0.02
-0.04
-0.06
Future Spot Rate

1.46

is worksheet under any circumstances

1.46

1.54

1.62

Chapter 5: Foreign Currency Options


This template helps students in calculating calculate the put option profits for buyer and seller.
Students need to enter the required information in the input screen (green shaded cells).
Output is automatically updated as the information in the input screen is changed.
Please change the spot rate in item 4a, in order to see its impact on the net profit.
Input Screen
Foreign currency in question
2. Option Premium per unit
3. Strike Price
4. Spot rate at the exercise time
4a. New spot rate at the exercise time
5. One unit in option equals
6. Brokerage fee per contract
7. Number of contracts bought

British Pounds
$0.04
$1.80
$1.85
$1.86
31,250.00
$0.00
1

Conclusion:
The higher the assumed spot rate at the time the put option was exercised, the lower would be the net profit. The
contingency graph shows this relationship as well, although there is a maximum loss equal to the premium paid.
OUTPUT SCREEN
Net profit to put option buyer
Selling price of
Purchasing price of
Option premium paid
Net profit

as per item 4
as per item 4a
Per Unit
Per Contract Total
Per Unit
$1.80
$56,250.00
$56,250.00
$1.80
($1.85) ($57,812.50) ($57,812.50)
($1.86)
($0.04)
($1,250.00)
($1,250.00)
($0.04)
($0.09)
($2,812.50)
($2,812.50)
($0.10)

Net profit to put option seller


(not in the original problem)
Selling price of
Purchasing price of
Option premium received
Net profit

as per item 4
as per item 4a
Per Unit
Per Contract Total
Per Unit
$1.85
$57,812.50
$57,812.50
$1.86
($1.80) ($56,250.00) ($56,250.00)
($1.80)
$0.04
$1,250.00
$1,250.00
$0.04
$0.09
$2,812.50
$2,812.50
$0.10

er would be the net profit. The


ss equal to the premium paid.

Per Contract Total


$56,250.00
$56,250.00
($58,125.00) ($58,125.00)
($1,250.00)
($1,250.00)
($3,125.00)
($3,125.00)

Per Contract Total


$58,125.00
$58,125.00
($56,250.00) ($56,250.00)
$1,250.00
$1,250.00
$3,125.00
$3,125.00

The Contingency Graph for Put Option Buyer


This graph is automatically prepared. Please do not enter any information in this worksheet under any circumstanc

Spot Rate Profit


2.00
-0.04
1.96
-0.04
1.92
-0.04
1.88
-0.04
1.84
-0.04
1.80
-0.04
1.76
0.00
1.72
0.04
1.68
0.08
1.64
0.12
1.60
0.16
1.56
0.20
1.52
0.24
1.48
0.28
1.44
0.32
1.40
0.36
1.36
0.40
1.32
0.44
1.28
0.48
1.24
0.52
1.20
0.56
1.16
0.60
1.12
0.64
1.08
0.68
1.04
0.72
1.00
0.76
0.96
0.80
0.92
0.84
0.88
0.88
0.84
0.92
0.80
0.96
0.76
1.00
0.72
1.04
0.68
1.08
0.64
1.12
0.60
1.16
0.56
1.20
0.52
1.24
0.48
1.28
0.44
1.32
0.40
1.36
0.36
1.40
0.32
1.44
0.28
1.48
0.24
1.52

$1.80
$0.04

Payoff for Put Option Buyer

Net Profit Per Unit

The Strike Price =


Option Premium =

1.90
1.70
1.50
1.30
1.10
0.90
0.70
0.50
0.30
0.10
-0.10

0.08 0.24 0.40 0.56 0.72 0.88 1.04 1.20 1.36 1.52 1.68

Future Spot Rate

0.20
0.16
0.12
0.08
0.04
0.00

1.56
1.60
1.64
1.68
1.72
1.76

is worksheet under any circumstances

1.68 1.84 2.00

The Contingency Graph for Put Option Seller


This graph is automatically prepared. Please do not enter any information in this worksheet under any circumstanc

Spot Rate Profit


2.00
0.04
1.96
0.04
1.92
0.04
1.88
0.04
1.84
0.04
1.80
0.04
1.76
0.00
1.72
-0.04
1.68
-0.08
1.64
-0.12
1.60
-0.16
1.56
-0.20
1.52
-0.24
1.48
-0.28
1.44
-0.32
1.40
-0.36
1.36
-0.40
1.32
-0.44
1.28
-0.48
1.24
-0.52
1.20
-0.56
1.16
-0.60
1.12
-0.64
1.08
-0.68
1.04
-0.72
1.00
-0.76
0.96
-0.80
0.92
-0.84
0.88
-0.88
0.84
-0.92
0.80
-0.96
0.76
-1.00
0.72
-1.04
0.68
-1.08
0.64
-1.12
0.60
-1.16
0.56
-1.20
0.52
-1.24
0.48
-1.28
0.44
-1.32
0.40
-1.36
0.36
-1.40
0.32
-1.44
0.28
-1.48
0.24
-1.52

$1.80
$0.04

Payoff for Put Option Seller

Net Profit Per Unit

The Strike Price =


Option Premium =

0.00
-0.20
-0.40
-0.60
-0.80
-1.00
-1.20
-1.40
-1.60
-1.80
-2.00

0.08 0.24 0.40 0.56 0.72 0.88 1.04 1.20 1.36 1.52 1.68

Future Spot Rate

0.20
0.16
0.12
0.08
0.04
0.00

-1.56
-1.60
-1.64
-1.68
-1.72
-1.76

is worksheet under any circumstances

1.68 1.84 2.00