Finance

Instructions

Navigate to www.google.com/finance (Links to an external site.)Links to an external site. and type in AAPL in the search bar at the top of the screen. Select Option Chain in the left column. Choose a strike month that is at least 2 months away from today. Show the options chain used and all work for each strategy. If I cannot replicate what you did to verify your math, then the item will be marked as incorrect by default. Read these directions VERY CAREFULLY. Choose any call contract that is out of the money. This means a strike price that is above the current market price. It is best to select a strike price that is 1 or two steps higher than the current market price. Use the snipping tool (not a screen shot) of the options chain showing the contract you selected and include it in your MS Word document labeled as Exhibit A. The call buyer will be transacting at the ask price and a call seller will be transacting at the bid price. Calculate from the perspective of a call buyer the breakeven point, max profit, and max loss. Calculate for a call seller (at the same strike price) the breakeven point (BEP), max profit, and max loss. This portion of the assignment is worth 2 points. Choose any put contract that is out of the money. Choose a strike month that is at least 2 months away from today. Choose any put contract that is out of the money. This means a strike price that is below the current market price. It is best to choose a strike that is 2 or 3 steps away from the current market price. Use the snipping tool (not a screen shot) of the options chain showing the contract you selected and include it in your MS Word document labeled as Exhibit B. The put buyer will be transacting at the ask price and a put seller will be transacting at the bid price. Calculate from the perspective of a put buyer the breakeven point, max profit, and max loss. Calculate for a put seller (at the same strike price) the breakeven point, max profit, and max loss. This portion of the assignment is worth 2 points. I have had previous students organize their findings using the table below. This is a great way to organize your thoughts and answers. You should use this as a model to organize all of your options strategies for this assignment. You should include a brief discussion of the strategy and why an investor would want to use this SPECIFIC STRATEGY. All formulas should be shown in this matrix for all options strategies in this paper. This is so that I can see exactly how you derived your numbers. If I need to hunt for your math and it looks like it might be wrong, then it will be marked wrong...show me how you calculated each and every value. Everything within the matrix should be in per share terms (i.e. $15.75 not $1,575...no need to multiply by 100 for the contracts in this exercise). Options Strike Special Assignment Organization Image - from Wonil Park F14.PNG Using Apple, construct a long straddle strategy using real option contracts. You should select a strike price that is close to the current market price. Discuss why an investor would want to use this strategy. Show the mathematical breakeven point, max profit, and max loss for the strategy. This portion of the assignment is worth 2 points. Use a similar matrix display as shown above for your MS Word document. Using Apple, construct a bull call spread (BCS) strategy using real option contracts. For the BCS, your lower strike price should be one strike price step above the current market price, and your higher strike price should be 2-3 strikes above the current market price. Discuss why an investor would want to use this strategy. Show the mathematical breakeven point, max profit, and max loss for the strategy. This portion of the assignment is worth 2 points. Use a similar matrix display as shown above for your MS Word document. Using Apple, construct a collar strategy using real option contracts. Your put option should be 2-3 strikes below the current market price, and your call should be 2-3 strikes above the current market price. Discuss why an investor would want to use this strategy. Show the mathematical breakeven point, max profit, and max loss for the strategy. This portion of the assignment is worth 2 points. Use a similar matrix display as shown above for your MS Word document. Required Formatting:You need to include screen captures (snipping tool) all options chains used in forming your strategies. If I cannot verify your math, then it will be marked incorrect. There should also be a brief description talking about each strategy and why you might consider using each. Your document should be in Times New Roman, 12 point font with 1-inch margins. Type your name and the assignments name in the Header (Insert tab, then select Header in MS Word). Do not include a heading in the body of your text to fill spaceI will remove it when determining the length requirement.

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