## Scenarios for the dollar at the end of April Let’s assume that on date A (1.2.00) the dollar exchange rate is 4.10 NIS and you have a shekel deposit in the bank in the amount of 41,000 NIS (equivalent to K$10) which gives you an interest of 1% per month (without taking into account compound interest). The deposit is intended for a payment of $10,000 at the end of April as a down payment on a house you bought. You are afraid of depreciation and buy a call option “$ c 410 apr” for a premium of 1,000 NIS from the deposit funds. Let’s now examine how many dollars you will have on date B (end of April) in two scenarios: 1. The dollar exchange rate will reach 4.40 NIS.
2. The dollar exchange rate will remain stable and stand at 4.10 NIS.
### Scenario #1: $= 4.40 NIS
– Original deposit value: 41,000 NIS
– Purchase of a call option: (1,000 NIS)
– Total deposit value: **40,000 NIS**
– Interest for 3 months (3%): 1,200 NIS
– Total deposit value on date B: **41,200 NIS**
– Profit from option: 3,000 NIS
– Total money in your hand: **44,200 NIS**
– Dollar equivalent: $10,045 ### Scenario #2: $= 4.10 NIS
– Original deposit value: 41,000 NIS
– Purchase of a call option: (1,000 NIS)
– Total deposit value: **40,000 NIS**
– Interest for 3 months (3%): 1,200 NIS
– Total deposit value on date B: **41,200 NIS**
– Total money in your hand: **41,200 NIS**
– Dollar equivalent: $10,048
### Profit from an option (1)
– Price of $10k on the market: 44,000 NIS
– Exercise price of $10k: (41,000 NIS)
– Profit from the option: **3,000 NIS** ### equivalent in dollars (2)
– $10,048 = NIS 4.10 / NIS 41,200
– $10,045 = 4.40 NIS / 44,200 NIS ### In scenario #1: If we had not bought the option
– Deposit: 41,000 NIS
– Interest: 1,230 NIS
– Total NIS: 42,230 NIS
– Total $: $9,957 = 4.40 NIS / 44,200 NIS
