An illustration should enlighten the potential losses of this derivative for the company. Suppose that the actual exchange rate is R$1,60 per dollar, the strike price is R$1,65 per US$1, the notional value is U$15 million, and that at the end of the first month the exchange rate jumps to R$2 per dollar (granted, a big jump in the exchange-rate, but this is smaller than the one that happened in the financial crisis). The total losses for the
company is determined by: