Two 6-month corn put options are available. The strike prices are $1.80 and $1.75 with premiums of $0.14 and $0.12, respectively. Total costs are $1.65 per bushel and 6-month interest rates are 4.0%
Farmer Jayne wishes to hedge 20,000 bushels for 6 months. What is the highest profit or minimum loss between the two options if the spot price in 6 months is $1.70 per bushel?
A)
$88 loss
B)
$88 gain
C)
$496 loss
D)
$496 gain
Answer:
B
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