Chapter 02 · Section 2.1
Position Expectations
Victor is long 3 PHLX DM Options. Victor, as an investor, expects:
a) the exchange rate (US$ cents per DM) to fall.
b) the exchange rate (US$ cents per DM) to rise.
c) the exchange rate (US$ cents per DM) to remain stable.
d) We cannot tell from this information what price movement he expects.
Is it a put or a call option?
It is essential to know whether it is a put or a call option.
Can you tell from the information given?
PHLX DM options are quoted in US$ per DM. You can therefore think of the DM exchange rate just as if instead of DM we were talking about a commodity like gold, or wheat.