1. sell francs forward in return for Australian dollars.
2. sell Australian dollars forward in return for francs.
3. buy Swiss francs forward in return for the Australian dollars.
4. do either 2 or 3.
Choose the correct option.
The correct choice is option 4. A forward sale of the Australian dollar commits the trader to buy Swiss francs for 0.81 Australian dollars each in 90 days. When that time comes, he expects to be able to sell those francs for 0.90 Australian dollars each, for a net gain of 9 Australian cents per unit. Notice that a forward sale of the Australian dollar is equivalent to a forward purchase of the Swiss franc in this case. The trader is short on Australian dollars and long on Swiss francs.