2009 CFA Exam #9 B ii

I don’t understand why the put option is in the money. If we have the right to sell 100 JPY/CAD but instead can sell 102.5 JPY/CAD isn’t the put worthless?

Hmm…just throwing this out there and not sure if it’s right but: You can use 100 JPY for 1 CAD or you can use 102.5…I’d rather only use 100 so that would mean the put does have some worth.

which would you prefer - getting 1 CAD for 100 JPY or 1 CAD for 102.5 JPY… similar to the question mutualfundsig is asking above.

bpdulog - I had the same question myself until I re-read the problem. He was buying Puts on the JPY - if you look at the quotes given, they are based on the EUR. When you convert that to a JPY base, you discover they are in the money.