Calculate the payoffs at different price levels

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Reference no: EM131090537

At this point in the term, you have bought stocks, related calls and puts with different strike prices and maturity dates. As well, you have bought some futures contracts.

The ADDITIONAL objectives of the second part of the project are:

1. Set up different trading strategies using stocks and/or indices and options.

2. Calculate implied volatility and compare with real volatility.

For Objective 1, you need to do the following:

1. Using one of your stocks and the corresponding put,

a. create a protective put trading strategy to protect ALL of that one stock that you have bought; If you do not have total coverage, then only cover the number of stocks based on the number of put options that you have bought.

b. using Excel, calculate the payoffs at different price levels;

c. draw a graph of the payoff; and

d. summarize what you did and what was the result/benefit of the protective put.

2. Repeat 1 above for a bull spread trading strategy using calls.

3. Repeat 1 above for a butterfly spread trading strategy using puts.

4. Repeat 1 above for a straddle trading strategy.

5. Repeat 1 above for a strangle trading strategy.

For Objective 2, you need to do the following:

1. Take ONE stock and find the implied volatility for each of the 8 weeks. Use Derivagem to do this.

2. Convert them to annual implied volatilities.

3. Calculate the real volatility for the past year, using standard deviation.

4. Compare the implied and real annual volatilities.

Note that, like the first four weeks, you will show and discuss the performance of each individual instrument and the total portfolio for the entire 8 weeks. Ensure that you provide conclusions and lessons learned.

Attachment:- Investment Report.rar

Reference no: EM131090537

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