Series 7 Exam Question 85: Answer and Explanation

Question: 85

If an investor believes the U.S. dollar will appreciate in relation to the Euro, which of the following option strategies should they choose?

• A. Purchase U.S. dollar calls
• B. Purchase U.S. dollar puts
• C. Purchase Euro calls
• D. Purchase Euro puts

Correct Answer: D

Explanation:

D. If an investor believes the U.S. dollar will appreciate in value compared to the Euro, an excellent strategy would be to buy U.S. dollar calls. However, since there aren't options on the U.S. dollar, the investor should purchase Euro puts because they believe the Euro will drop in relation to the U.S. dollar.