CFA Practice Question

There are 206 practice questions for this study session.

CFA Practice Question

An options investor purchases one foreign currency call option on Swiss francs (SF). The call has the following characteristics:

Type of option: call option
Underlying asset: SF62,500 (62,500 Swiss francs)
Exercise price: $0.61 per SF
Premium: $0.003 per SF
Expiration date: December

By taking a LONG position in this call option, the investor has ______.
A. obligated himself to buy SF62,500 and pay $38,125 during the specified time period (expiration date in December)
B. purchased the right to decide whether to buy SF62,500 and pay $38,125 during the specified time period (expiration date in December)
C. purchased the right to decide whether to sell SF62,500 and receive $38,125 during the specified time period (expiration date in December)
Explanation: A LONG call gives the owner the right to decide to buy. The exercise price is (1)(62,500)(0.61) = 38,125.

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