finance

StockTrak Assignment 6

We will compare the relative performance of shares, futures and options during the week of April 7-11. Implement the following four transactions on Monday –

1) Buy 500 shares of S&P500 tracking ETF SPY
2) Buy 2 June futures contract for S&P 500 (Globex)
3) Buy 5 calls for SPY expiring on last available date in June 2014 at a strike price of 190. 4) Buy 5 puts for SPY expiring on last available date in June 2014 at a strike price of 190.

On Friday, reverse the above transactions or sell off all the above shares, futures and options in your account.

Tabulate the payment for entering into the transaction, the investment required, the dollar profit /loss and the return for each of the transactions. Comment on the relative investment required and the relative return for the transactions. 

StockTrak Assignment 5

We are going to analyze the returns of firms with different Price-to-earnings (PE) ratios. Identify an industry and two firms in it with different PE ratios. You should be able to use research feature on Stocktrak or on any of the popular websites like finance pages on Google.com, Yahoo.com, msn.com. Firm 1 should ideally have the highest PE ratio in its industry and Firm 2 should have the lowest PE ratio in the same industry. Buy 100 shares of each firm. Document the NAICS code(s), PE ratio as well as the beta of the two firms.

List the returns of the two firms for the period March 31 – April 4. Using S&P 500 as the market portfolio, calculate the “alphas” of the two firms for the week using the CAPM model. Comment on the relation between the PE ratio, beta and alphas.