Do you exercise your option what is the net dollar


The current oil pricing curve looks like this:

Jan $52.00 per barrel

Feb $53.25 per barrel

Mar $54.55 per barrel

You elect to hedge Jan and Feb by a straight swap (floating for fixed rate) and Mar by purchasing an option.

The premium for a Mar18 option Call is: $1,000 per 1000 barrels.

The premium for a Mar18 option Put is:   $500 per 100 barrels.

On Mar 31,2018, the spot price of a barrel of oil drops to $38.75. Do you exercise your option? What is the net dollar settlement of the option if exercised?

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Financial Management: Do you exercise your option what is the net dollar
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