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CIMAPRO19-P03-1 Exam - Topic 6 Question 110 Discussion

A UK manufacturing company has simultaneously:* purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65* sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61(this option has the same maturity date as the put).Which of the following is a valid explanation for entering into these option positions?
A) The company expects to receive USD 1million from a customer and wishes to offset the cost of the put option by the premium on the call option.
B) The company expects to pay USD 1million to a supplier and wishes to offset the premium from the call option against the cost of the put option.
C) The company expects to receive USD 1million from a customer and wishes to obtain an additional benefit if the USD strengthens beyond GBP 1.00 = USD 1.61.
D) The company expects to pay USD 1million to a supplier and wishes to obtain additional protection against the USD strengthening beyond GBP 1.00 = USD 1.65.

CIMAPRO19-P03-1 Exam - Topic 6 Question 110 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam
Question #: 110
Topic #: 6
[All CIMAPRO19-P03-1 Questions]

A UK manufacturing company has simultaneously:

* purchased a put option to sell USD 1million at an exercise price of GBP1.00 = USD1.65

* sold a call option that grants the option holder the right to buy USD 1million at a price of GBP1.00 = USD1.61(this option has the same maturity date as the put).

Which of the following is a valid explanation for entering into these option positions?

Show Suggested Answer Hide Answer
Suggested Answer: A

by Jeanice at Jul 20, 2026, 06:54 PM

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Linn
3 days ago
I disagree. Option C is better. They can benefit if USD strengthens.
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Lynelle
9 days ago
I think option A makes sense. They want to hedge their USD income.
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Keena
14 days ago
Wait, how does offsetting premiums even work in this case?
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Ailene
19 days ago
D) sounds right, they need protection against a stronger USD.
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Lawana
24 days ago
C) is interesting, but why would they want to sell a call then?
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Zena
29 days ago
I disagree, B) is more likely since they might be paying a supplier.
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Garry
1 month ago
A) makes sense if they're expecting to receive USD.
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Delmy
1 month ago
I recall something about using options to offset costs, so maybe option B is right, but it seems a bit off since they’re selling a call.
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Letha
1 month ago
I feel like option C could also be valid since they might want to benefit if the USD strengthens, but I'm not completely confident.
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Leatha
2 months ago
I think option A makes sense because if they're expecting to receive USD, they would want to protect that amount with the put.
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Kent
2 months ago
I remember we discussed how companies use options to hedge against currency fluctuations, but I'm not sure which option fits best here.
upvoted 0 times
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