Please list team members below

All work should be submitted in a single, well structured, professionally looking Excel

containing your conclusions and supporting analysis.

Using Bloomberg or other source populate the table in Exhibit 1 for the three stocks you ch
from tab "List". For each of the strategies presented in the "Strategies" tab, draw a profit an
loss diagram using Excel. It needs to be an Excel generated graph; it can not be a snapshot
A hand drawn diagram. Each diagram should include plots of the individual components (leg
of the strategy as well as of the overall result - in a different color, for clarity. Please place
chart for Stratey 1 in the tab named "C S1", the chart for Stratey 2 in the tab named
S2", ..., chart for Stratey 8 in the tab named "C S8".

Would Strategy 1 require you to buy: A. shares of ONE? B. a put option on ONE? C. a ca
B
option on ONE? Explain briefly. Please provide the answer in tab "C S1"

C
Discuss the profitability of Strategy 2 as a function of price of ONE at expiration. Please
provide the answer in tab "C S2".

D What is the breakeven share price of Strategy 3? Please provide the answer in tab "C S3".

What would be the maximum loss per share that would be incurred if Strategy 4 was
E
implemented? Please provide the answer in tab "C S4".

F
How would Strategy 5 be best described? A collar? A straddle? A bear spread? Somethin
else? Explain briefly. Please provide the answer in tab "C S5".

Regarding Strategy 5: Does it have unlimided upside? If not what is the maximum profit?
G Does if offer protection against losses if TWO's share price falls? Explain briefly. Please
provide the answer in tab "C S5".
H Calculate the breakeven share price for Strategy 6. Please provide the answer in tab "C S6"

What would be the maximum gain per share that could be earned if Strategy 7 is implemen
K
Please provide the answer in tab "C S7".

Let's say that over the past few months, you have followed news reports on a proposed mer
between THREE and one of its competitors. A government antitrust committee is currently
reviewing the potential merger. You expect the share price to move sharply up or down
L depending on whether the committee decides to approve or reject the merger next week.
Recommend an option trade that might allow an investor to benefit from a significant move
the THREE share price regardless of the direction of the move. How much would it cost to
implement? What are the breakeven prices. Please provide the answer in tab "T L".

Consider an option trade recommended in one the Barron's Striking Price columns that hav
been posted throughout the semester under the Current Events folders on Blackboard. Assu
you could have intiated that trade at the prices mentioned in the column. Comment on the
M
proposed trade and explain why, in your opinion it made(or not made) sense at the time it w
proposed. Then, in retrospective, figure out what would have been the outcome; would that
trade have been profitable? Please place your analysis in tab "T M".
 ally looking Excel file

three stocks you chose

ab, draw a profit and
not be a snapshot of a
ual components (legs)
arity. Please place
in the tab named "C

n on ONE? C. a call
S1"

xpiration. Please

wer in tab "C S3".

rategy 4 was

r spread? Something

e maximum profit?
in briefly. Please
nswer in tab "C S6".

tegy 7 is implemented.

on a proposed merger
mmittee is currently
ply up or down
erger next week.
a significant move in
uch would it cost to
n tab "T L".

ce columns that have

n Blackboard. Assume
Comment on the
ense at the time it was
utcome; would that
Pick three different stocks from tab "List" and fill the data in the template below.

Exhibit 1
current
Date
date

Stock Share Call Option Date / Put

Ticker Price Premium Strike Premium

call11 April/K11 put11

ONE P1 call12 April/K12 put12
call13 April/K13 put13
call21 April/K21 put21
TWO P2 call22 April/K22 put22
call23 April/K23 put23
call31 January/K31 put31
THREE P3 call32 April/K32 put32
call33 December/K33 put33

For Ki2, where i=1,2,3, pick from all the strike prices available in the option chain, pick th
that is closest to the current share price Pi, i.e. the option is roughly at the money.

For Ki1, where i=1,2, from all the strike prices available in the option chain, pick the one th
closest to 0.93*Pi (93% of the current share price Pi). As for K31, make it equal to K33, a
below.
For K13, from all the strike prices available in the option chain, pick the one that is closest
1.05*P1 (105% of the current share price P1).
For K23, from all the strike prices available in the option chain, pick the one that is closest
1.21*P2 (120% of the current share price P2)
For K33, from all the strike prices available in the option chain, pick the one that is closest
1.07*P3 (107% of the current share price P3)
Make K31 equal to K33
If there are more than one option expiration dates for a given month pick the last one availa

Example: let's say stock ONE is Micron Electronics (MU), which was trading at 37.85 on N
2018; in this case i=1, K12 = 38, K11 = 35, K13=40; Please see below snapshot from Bloo
(function OMON )
ate below.

option chain, pick the one

he money.

chain, pick the one that is

ke it equal to K33, as shown

he one that is closest to

he one that is closest to

he one that is closest to

ck the last one available.

trading at 37.85 on Nov 13

snapshot from Bloomberg
Information from Bloomberg
Call Option Price
Stock Ticker Share Price Bid Ask
14.50 15.50
AMD 93.74 11.60 11.90
10.35 11.90
57.60 59.20
ADBE 481.26 41.05 44.70
10.30 11.55
4.95 5.40
ADSK 277.06 23.30 24.70
1.15 1.48
 Put Option Price
Calculations Option Date/Strike Bid Ask
87.18 87.50 7.50 8.95
94.00 95.00 12.05 12.95
98.43 97.50 13.20 15.25
447.57 450.00 25.80 26.75
481.00 480.00 39.00 41.95
582.32 580.00 106.90 109.45
296.45 300.00 27.45 28.15
277.00 280.00 26.10 26.90
296.45 300.00 23.70 24.55
Consider the following strategies relating to stock ONE
Strategy 1: Constructing a synthetic long put position in ONE
Strategy 2: Buying 100 shares of ONE and writing the April / K12 call option on ONE  

Strategy 3: Implementing a covered call position in ONE using the April/K13 option 

Consider the following strategies relating to stock TWO

Strategy 4: Implementing a protective put position in TWO using the April / K22 option 

Strategy 5: Buying 100 shares of TWO, buying the April/K21 put option, and writing the
April/K23 call option
Strategy 6: Implementing a bear spread in TWO using the April/K22 and April/K23 strike
options

Finally consider the following strategies relating to stock THREE

Strategy 7: Writing both the April/K32 strike call option and the April/K32 strike put option
THREE

Strategy 8: Writing the December/K33 strike call option and buying the January/K31 strike
option on THREE
option on ONE  

l/K13 option 

pril / K22 option 

n, and writing the

d April/K23 strike

K32 strike put option on

January/K31 strike call

CIEN Ciena
MU Micron Electronics
AMD Advanced Micro Devices
ADBE Adobe
ADSK Autodesk
KMX Carmax
FFIV F5 Networks
Strategy 1: Constructing a synthetic long put position in AMD

Share Price 93.74

K12 call option at premium 11.90
Strike Price 95.00

Stock price at expiry Profit/(loss) from option

- (11.90)
5.00 (11.90)
10.00 (11.90)
15.00 (11.90)
20.00 (11.90)
25.00 (11.90)
30.00 (11.90)
35.00 (11.90)
40.00 (11.90)
45.00 (11.90)
50.00 (11.90)
55.00 (11.90)
60.00 (11.90)
65.00 (11.90)
70.00 (11.90)
75.00 (11.90)
80.00 (11.90)
85.00 (11.90)
90.00 (11.90)
95.00 (11.90)
100.00 (6.90)
105.00 (1.90)
110.00 3.10
115.00 8.10
120.00 13.10
125.00 18.10
130.00 23.10
135.00 28.10

Q) Would Strategy 1 require you to buy: A. shares of ONE? B. a put option on ONE? C.

Answer) Buy a call option and take a short position in the stock. A synthetic put's goal is
underlying stock's price. With the synthetic put strategy, when the stock price increases o
and we will benifit from decline in stock price by having a short position in the stock itself
Q) Would Strategy 1 require you to buy: A. shares of ONE? B. a put option on ONE? C.

Answer) Buy a call option and take a short position in the stock. A synthetic put's goal is
underlying stock's price. With the synthetic put strategy, when the stock price increases o
and we will benifit from decline in stock price by having a short position in the stock itself
n in AMD

Profit/(loss) from Short stock position Net Profit / (Loss)

93.74 81.84
88.74 76.84
83.74 71.84
78.74 66.84
73.74 61.84
100.00
68.74 56.84
63.74 51.84
90.00
58.74 46.84
53.74 41.84 80.00
48.74 36.84
43.74 31.84 70.00
38.74 26.84
33.74 21.84 60.00
28.74 16.84
23.74 11.84 50.00
Profitability
18.74 6.84
40.00
13.74 1.84
8.74 (3.16)
30.00
3.74 (8.16)
(1.26) (13.16) 20.00
(6.26) (13.16)
(11.26) (13.16) 10.00
(16.26) (13.16)
(21.26) (13.16) -
- 5.00 10.00 15.00 20.00 2
(26.26) (13.16)
(31.26) (13.16) (10.00)
(36.26) (13.16)
(20.00)
(41.26) (13.16)

hares of ONE? B. a put option on ONE? C. a call option on ONE? Explain briefly.

osition in the stock. A synthetic put's goal is to profit from the anticipated decline in the
ut strategy, when the stock price increases our losses will be limited to call premium of $13.16
by having a short position in the stock itself.
hares of ONE? B. a put option on ONE? C. a call option on ONE? Explain briefly.

osition in the stock. A synthetic put's goal is to profit from the anticipated decline in the
ut strategy, when the stock price increases our losses will be limited to call premium of $13.16
by having a short position in the stock itself.
 SYNTHETIC LONG PUT
Profit/(loss) from option Profit/(loss) from Short stock position Net Profit / (Loss)
100.00

90.00

80.00

70.00

60.00

50.00

40.00

30.00

20.00

10.00

-
5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 50.00 55.00 60.00 65.00 70.00 75.00 80.00 85.00 90.00 95.00 100

(10.00)

(20.00)
Stock Price at Expiry

n the
of $13.16
n the
of $13.16
 Net Profit / (Loss)

85.00 90.00 95.00 100.00 105.00 110.00 115.00 120.00 125.00 130.00 135.00
 Strategy 2: Buying 100 shares of ONE and writing the April / K12 call option on AMD

Share Price 93.74

K12 call option at premium 11.90
Strike Price 95.00

Stock price at expiry Profit/(loss) from shares Profit/(loss) from option

- (93.74) 11.90
5.00 (88.74) 11.90
10.00 (83.74) 11.90
15.00 (78.74) 11.90
20.00 (73.74) 11.90
25.00 (68.74) 11.90
30.00 (63.74) 11.90
35.00 (58.74) 11.90
40.00 (53.74) 11.90
45.00 (48.74) 11.90
50.00 (43.74) 11.90
55.00 (38.74) 11.90
60.00 (33.74) 11.90
65.00 (28.74) 11.90
70.00 (23.74) 11.90
75.00 (18.74) 11.90
80.00 (13.74) 11.90
85.00 (8.74) 11.90
90.00 (3.74) 11.90
95.00 1.26 11.90
100.00 6.26 6.90
105.00 11.26 1.90
110.00 16.26 (3.10)
115.00 21.26 (8.10)
120.00 26.26 (13.10)
125.00 31.26 (18.10)
130.00 36.26 (23.10)
135.00 41.26 (28.10)

Q) Discuss the profitability of Strategy 2 as a function of price of ONE at expiration

Answer) This strategy is called COVER CALL WRITING.

Maximum Profit = $13.16 per share( Strike price of the short call option, less the p
premium received.)
Maximum Loss = $81.84 per share (Purchase price of the underlying stock less the
Answer) This strategy is called COVER CALL WRITING.

Maximum Profit = $13.16 per share( Strike price of the short call option, less the p
premium received.)
Maximum Loss = $81.84 per share (Purchase price of the underlying stock less the
ion on AMD

Net Profit / (Loss)

(81.84)
(76.84) Profit/(loss)
(71.84)
100.00
(66.84)
(61.84)
80.00
(56.84)
(51.84) 60.00
(46.84)
(41.84) 40.00
(36.84)
(31.84) 20.00
PROFITABILITY

(26.84)
(21.84) -
- 5.00 10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 5
(16.84)
(11.84) (20.00)
(6.84)
(1.84) (40.00)
3.16
8.16 (60.00)
13.16
13.16 (80.00)
13.16
13.16 (100.00)
S
13.16
13.16
13.16
13.16
13.16

ce of ONE at expiration.

t call option, less the purchase price of the underlying stock, plus the

derlying stock less the premium received.)

t call option, less the purchase price of the underlying stock, plus the

derlying stock less the premium received.)

 COVERED CALL AT K12
Profit/(loss) from shares Profit/(loss) from option Net Profit / (Loss)

30.00 35.00 40.00 45.00 50.00 55.00 60.00 65.00 70.00 75.00 80.00 85.00 90.00 95.00 100.00 105.00 110.00 115.00 1

STOCK PRICE AT EXPIRATION

105.00 110.00 115.00 120.00 125.00 130.00 135.00
Strategy 3: Implementing a covered call position in ONE using the April/K13 option 

Share price price 93.74

call option at premium 11.90
Strike Price 97.50

Stock price at expiry Profit/(loss) from stock

- (93.74)
5.00 (88.74)
10.00 (83.74)
15.00 (78.74)
20.00 (73.74)
25.00 (68.74)
30.00 (63.74)
35.00 (58.74)
40.00 (53.74)
45.00 (48.74)
50.00 (43.74)
55.00 (38.74)
60.00 (33.74)
65.00 (28.74)
70.00 (23.74)
75.00 (18.74)
80.00 (13.74)
81.84 (11.90)
85.00 (8.74)
90.00 (3.74)
95.00 1.26
100.00 6.26
105.00 11.26
110.00 16.26
115.00 21.26
120.00 26.26
125.00 31.26
130.00 36.26
135.00 41.26

Question). What is the breakeven share price of Strategy 3?

Answer)
Breakeven Price is $81.84. This is acheived when loss of $11.90 from share
Question). What is the breakeven share price of Strategy 3?

Answer)
Breakeven Price is $81.84. This is acheived when loss of $11.90 from share
 Profit/(loss) from option Net Profit / (Loss)
11.90 (81.84)
11.90 (76.84)
11.90 (71.84)
11.90 (66.84)
11.90 (61.84) 50.00
11.90 (56.84)
11.90 (51.84) 40.00
11.90 (46.84)
30.00
11.90 (41.84)
11.90 (36.84) 20.00
11.90 (31.84)
10.00
11.90 (26.84)
11.90 (21.84) -
11.90 (16.84) - 00 .0
0
.0
0
.0
0
.0
0
.0
0
5. 10 15 20 25 30
(10.00)
11.90 (11.84)
11.90 (6.84)
Profitabilty

(20.00)
11.90 (1.84)
(30.00)
11.90 -
11.90 3.16 (40.00)
11.90 8.16
(50.00)
11.90 13.16
9.40 15.66 (60.00)
4.40 15.66
(70.00)
(0.60) 15.66
(5.60) 15.66 (80.00)
(10.60) 15.66
(15.60) 15.66 (90.00)

(20.60) 15.66 (100.00)

(25.60) 15.66

y 3?

f $11.90 from shares is offsetted by premium collected on option writing $11.90 .

y 3?

f $11.90 from shares is offsetted by premium collected on option writing $11.90 .

 COVERED CALL AT K13
Profit/(loss) from stock Profit/(loss) from option Net Profit / (Loss)

0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 00 00 00 00
.0 .0 .0 .0 .0 . .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 .0 0. 5. 0. 5.
15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 10 10 11 11

Share Price at expiry

1.90 .
1.90 .
ss)

00 00 00 00 00 00 00 00 00 00
5. 0. 5. 0. 5. 0. 5. 0. 5. 0.
10 10 11 11 12 12 13 13 14