Reference no: EM13516265

Strike Assignment


Navigate to www.google.com/finance 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. Choose any call contract that is out of the money. This means a strike price that is above the current market price. Take a screen shot of this page showing the contract you selected and include it with your final assignment 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 break even point, max profit, and max loss. Calculate for a call seller (at the same strike price) the break even point, max profit, and max loss. This portion of the assignment is worth 5 points.

Now we will work with a put contract. 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. Take a screen shot of this page showing the contract you selected and include it with your final assignment 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 break even point, max profit, and max loss. Calculate for a put seller (at the same strike price) the break even point, max profit, and max loss. This portion of the assignment is worth 5 points.

Using Apple, construct a long straddle strategy using real options contracts. Discuss why an investor would want to use this strategy. Show the mathematical break even point, max profit, and max loss for the strategy. This portion of the assignment is worth 5 points.

Using Apple, construct either a bear put spread or a bull call spread strategy using real options contracts. Discuss why an investor would want to use this strategy. Show the mathematical break even point, max profit, and max loss for the strategy. This portion of the assignment is worth 5 points.

Using Apple, construct a collar strategy using real options contracts. Discuss why an investor would want to use this strategy. Show the mathematical break even point, max profit, and max loss for the strategy. This portion of the assignment is worth 5 points.

Submission

After you have constructed each of these options strategies, compile your findings in a Word document and submit at the link below.