If Blades uses call options to hedge its Yen payables, should it use the call option with the exercise price of $.00756 or the call option with the exercise price of $.00792? Describe the tradeoff.
2. Should Blades allow its Yen position to be un-hedged? Describe the tradeoff.
3. Assume there are speculators who attempt to capitalize on their expectations of the yen’s movement over the 2 months between the order and delivery dates by either buying or selling yen futures now and buying or selling yen at the future spot rate. Given this information, what is the expectation on the order date of the yen spot rate by the delivery date?