Eric is an option writer. in anticipation of a depreciation of the british pound from its current level of $1.50 to $1.45, he has written a call option with an exercise price of $1.51 and a premium of $.02. if the spot rate at the option's maturity turns out to be $1.54, what is eric's profit or loss per unit (assuming the buyer of the option acts rationally)?

Eric's profit or loss per unit is  - $0.01 loss

Explanation:

For computing Eric's profit or loss per unit, first, we have to calculate the maturity loss or gain which is shown below:

Exercise price - spot rate

$1.54 - $1.51

$0.03

The $0.03 would reflect the Loss

Now the profit or loss per unit would be equal to

= Premium - loss

= $0.02 - $0.03

= - $0.01

The -$0.01 defines the loss per unit as the per unit is negative

answer/// there is an inverse relationship between price and quantity demanded;