OVERVIEW & PURPOSE OF THIS PROJECT Trading with options is so much more profitab

OVERVIEW & PURPOSE OF THIS PROJECT
Trading with options is so much more profitable than just trading stocks, and it′s a lot easier
than most people think. This project lets you work on option trading using real financial data.
Idea underlying this project is for you to replicate the spreads and combinations learned in class
and speculate. At the end, we would want to create as much profit as possible (but it’s okay if
we were not able to)
I am sending email seprately
Trading with options is so much more profitable than just trading stocks, and it′s a lot easier
than most people think. This project lets you work on option trading using real financial data.
Idea underlying this project is for you to replicate the spreads and combinations learned in class
and speculate. At the end, we would want to create as much profit as possible (but it’s okay if
we were not able to)
Find the right stock. You want to find a company that you are interested in and have a good
insight on.
 Try to stick with industries you understand: if you enjoy shopping, look at retailers. If you
love gaming, look at game software company, etc. This will make your research a lot easier
and lead to a better stock pitch.
 Qualitatively, try to choose the best/worst company in that industry
 Quantitatively, use arbitrary parameters to filter out stocks. For example, you can select
certain criteria (i.e. market cap, P/E, ROE, industry, etc.) and it spits out list of companies
that meet the criteria. Free online stock screeners include Yahoo Finance, Google Finance,
and Capital IQ. (e.g. Yahoo Finance screener: https://finance.yahoo.com/screener/new/ )
SOURCES OF INFORMATION
1. General financial sites
 Yahoo Finance, Google Finance, MSN Money, Bloomberg terminals, WSJ.comWHAT TO DO :
 Replicate the following spreads/combinations: bull spread, bear spread, butterfly spread,
straddle, strip and strap by using call and/or put options
 FIN 463 individual basis: Replicate at least THREE of the aforementioned
spreads/combinations
WHAT SHOULD BE INCLUDED IN YOUR PAPER (similar to the given example
below):
1. SCREEN CAPTURE: Screen capture the option pricing information as in the example below on a
“traded date”. Then, choose which option information you need in order to create relevant
spread and/or combination. Note that you’d need to choose an expiration date that is before
the last day of class.
2. INFORMATION TABLE: Create a table to write down information of the options you have
used
3. PAYOFF/PROFIT TABLE & GRAPH OF YOUR CHOSEN TRADING STRATEGY: Create a
payoff/profit table and its graph for your spreads and combinations, respectively
4. ACTUAL PROFIT/LOSS AT EXPIRATION DATE: When expiration date reaches, find out
whether your spreads and combinations created a profit or loss. How much was your
total profit/loss?
5. BRIEF ANALYSIS & DISCUSSION: Discuss or suggest how you would have been made a
(larger) profit with the respective spreads/combinations : e.g. used different strike
prices? Different option types? Different positions?
Don′t forget to choose an option with expiration date that is at least on or before the final due date of the project! which is The due date for the project is april 17 ASSUME WE ARE DEALING WITH EUROPEAN OPTIONS (i.e. you can exercise the options at expiration date only)
This project is for you to utilize actual real finance data to replicate spreads and combinations
Please let me know if you need any more details.