When we arrived at Argentina, I had to learn the currency system and discovered that some coins in circulations were actually made of silver. I asked my uncle who was a jeweler to calculate how much it was worth which was more than the inflated face value of the ARgentine peso, so I started to collect old coins. Since it was forbidden to re-melt coins, I used to sit on the street bashing coins with a hammer to make them unrecognizible. Soon after the coins disappeared from circulation and I did not make much with this idea.
Now Espen Haug, a Norwegian quant, systematizes the idea. "One of the hallmarks of an alternative investment is an option-like payoff – a return distribution that is truncated or skewed. If that is the case, then the ubiquitous penny and quintessential nickel could be the most popular alternative investments in the United States (and, we suspect, in many other countries around the world in similar forms). Physical currencies – particularly those made from copper and nickel contain an option that is close enough to the money to have a material value and has even been in the money in the recent past."
Haug and Stevenson point out that pennies and nickels can be converted into electronic money at their face value, but that they also contain copper and nickel that, in 2007, was worth more than the denominations themselves. Put another way, pennies and nickels are really just long positions in copper and nickel combined with a put option on each with strike prices of one cent and five cents. If the price of the copper in a penny goes above one cent, the option is worthless. Likewise, if the price of the nickel in a nickel goes above five cents, the option is also out of the money.
Qustion: the 1 new shekel coin weigths 4 g and is made of Cupronickel (75% copper 25% nickel). On current exchange rate, 1 shekel is worth about 0.26 dollars. Is it worth to collect it as a metal option?
1 comments:
No. The metal is worth 0.026.
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