AFM Revision Kit Solution 42 Awan

[@nigarbabayeva6068]

VERY GOOD LECTURE.THKS

[@kalvirrakhra5438]

Hi Sabi. I hope you are well. For AFM, December 2018. For Q2) Nutourne Co. When they are calculating for Options, they use the Put Option (0.86). Why are they using this? As it is a Receipt, so why did they not use a "Call" option? Thanks!

[@SabiAkther]

The amount they want to hedge and option both are in same currency dollar. Hence you take option to sell dollar beacuse it receipt that's why put. If the option was priced in another currency and not dollar then in that case it will be call.

[@parvikarania4480]

Hi Sabi How do you know whether you have to add or subtract the unexpired basis to get the closing futures price?

[@SabiAkther]

opening future price minus unexpired basis.

[@parvikarania4480]

@@SabiAkther why don't we add? How do you know whether we have to add or subtract?

[@SabiAkther]

@@parvikarania4480 we always add unexpired basis with opening future price to get. closing future price. But when the unexpired basis is negative that time we deduct it from opening future price.

[@kalvirrakhra5438]

Hi Sabi. How do you know whether to buy put option or buy call option. Is there an easy way to remember this? Thanks! I always find it hard to judge whether an importer or exporter needs to buy put or buy call.

[@SabiAkther]

Hi Kalvir. If its investment then its always buy call option and if its borrowing then its always buy put option. This is the thumb rule.

[@kalvirrakhra5438]

@@SabiAkther thanks Sabi. What if a company is receiving a receipt, would it need put or call. Is there a thumb rule for this as well? Thanks Sabi!

[@SabiAkther]

@@kalvirrakhra5438 Its its receipt then call option. Receipt/investment same. Borrowing/payment put option. I hope your doubt is cleared now!

[@kalvirrakhra5438]

@@SabiAkther You are better than any BPP or Kaplan tutor that I have had. Thanks so much for your help. It's really appreciated.

[@kalvirrakhra5438]

@@SabiAkther Hi Sabi. You mentioned that if it is a receipt then it is a call option. For September 2018 AFM. Q1) Washi Co. For Washi Co, when using options...why have they chosen to use Put option? Because it is a receipt I thought they would use a call option? Where am I going wrong? Thanks Sabi!