For example, I make an agreement with you that I have the right to buy one of your eggs (1 yuan each) in six months. The current market price is 0.9 yuan each. Each 1 yuan is the purchase price for future execution of the contract, which is the finalized price or agreed price. My right is called a call. You will not give me my rights for free, you will make me spend money to buy them from you. Suppose we both think 0.05 yuan is appropriate, so I pay you 0.05 yuan to buy this right. 0.05 yuan is the premium option premium and option price.

If the final price is 0.8 yuan, then this right is greatly beneficial to me, so you will charge me more for the option fee. Charge me 0.25 or 0.30 etc. depending on our bargain, but it will definitely go up.

The first question is that the higher the final price, it means that the buyer of the call may have to spend more money in the future, the chance of profit will be reduced, and the option premium will decrease;

The put of The more funds the buyer is likely to receive in the future, the greater the chance of profit, causing the option premium to rise.

Second question: In the first case, no hedging

In the second case, use futures hedging to sell pound futures

In the third case, use Option hedging, buy pound, sell option (put)

Third question: No hedging in the first case

How many US dollars are actually received? How much more or less has it become compared to when the income occurred?

How much has the pound asset appreciated? The larger the number, the greater the risk.

In the second case, use futures hedging to sell pound futures

The appreciation of pound assets - the loss of pound futures. The number is definitely smaller, which reduces the risk.

In the third case, use option hedging to buy a pound put option (put)

The pound asset appreciates or depreciates - the loss and profit of the pound option (put) is larger, and the profit decreases There is a risk of loss, but there is still a possibility of profit.

The fourth question is similar to the third question but the result is different.

Scenario 1 No hedging

How many dollars are actually received? How much more or less has it become compared to when the income occurred?

How many US dollars have foreign exchange assets devalued? The number is definitely larger

In the second case, use futures hedging to sell pound futures

- Sterling asset depreciation + pound futures profit result number is definitely smaller

In the third case, use option hedging to buy the pound option (put)

- The depreciation of the pound asset + the profit figure of the pound option (put) is smaller.

You first understand the concept of options, and then you calculate according to my ideas.

There are no on-exchange options in my country. Except for warrants.

Third question: The first situation is no hedging.

Actually receiving US$1.71,

means that the pound asset appreciates by 0.1221?

In the second case, use futures hedging to sell pound futures

0.1221-(1.7075-1.5789) =0.0065. The small number reduces the risk

Chapter In the three situations, option hedging is used to buy and sell sterling options (put 0.35)

0.1221-0.35=-0.2279 loss, which reduces the risk of loss, but there is still the possibility of profit.