ATM call options

CFA Level III Derivatives
#1

Finquiz Item set Rd 28

Question includes

XYZ examines an ATM call option position the firm has undertaken on the SGD/USD. XYZ feels that the current position is expensive and that the firm will need to modify its strategy even if this requires sacrificing upside potential. The current SGD/USD spot rate is 1.17 and XYZ expects this rate to appreciate over the next six months

Can anyone please help me understand the below:

  1. What is the implication when it says 'current position is expensive ’

  2. What is the impact if ‘expects this rate to appreciate over the next six months’

The suggested is ‘risk reversal’ or ‘collar’.

Thank you