Analysis of Currency Option Strategies for XYZ Corporation

XYZ Corporation is a publicly traded company that recently announced plans to expand its operations internationally. The CFO is concerned about potential currency fluctuations impacting the company's profits from this expansion. To mitigate this risk, the CFO is considering implementing a currency option strategy using Euro options.

The current spot rate for the Euro is 1.10, and XYZ Corporation expects to receive €5 million in six months. The CFO is contemplating two strategies involving Euro options: a protective put and a covered call. The protective put strategy would involve purchasing Euro put options with a strike price of 1.08. The covered call strategy would involve selling Euro call options with a strike price of 1.12.

Your task is to analyze both strategies concerning their suitability for mitigating currency risk for XYZ Corporation, discussing the potential benefits and drawbacks of each option strategy. Additionally, explain how market conditions and volatility in the foreign exchange market might affect these strategies.