Chapter 02 · Section 2.1

Long - IMM Calls 2

Now let us study a slightly different scenario:

Suppose Victor entered a long position in 4 IMM March 45 DM calls in December. Now it is February, and the Deutsche Mark trades at $.44/DM.

As you can see, there is a difference of 1 cent between the exercise price and the $/DM rate. Victor can offset (liquidate) this position by selling:

b) IMM March 45 DM calls.
No. No matter what the current price is, you offset your position by selling what you are long, or by buying what you are short. However, the current price is reflected in the premium you pay or receive.