Assume Tesla Inc. (US electric vehicle manufacturer) intends to receive €375,000 in 3 months and
is concerned that the exchange rate expectations over the next three months would affect their
receivables adversely and wishes to hedge this risk. Given this scenario, please answer the following
questions:
(b) For the risk, you have mentioned in part (a) please recommend a hedging strategy that is
consistent with the outlook discussed in part (a) and explain why you have chosen this strategy
above all others (300 words)
(4 marks)
(c) Irrespective of your answer in part (b), assume you are using an exchange-traded option
‘combination’ strategy to hedge your risk. Open the option combination position in the CME
trading simulator and calculate the gain or loss of the total position. Since this assessment is a
24-hour assessment you may leave it for a couple of hours before calculating the gain or loss.
Please provide the following information:
Required:
Part I
What is your chosen option combination strategy? The reason for choosing the given option
combination strategy: (Max 150 words):