Financial Risk Management

profileamarettenicole
fin4486_advancedstrategies_blank_withnotes.xlsx
Home>Business & Finance homework help>Management homework help>Financial Risk Management

Money Spread (Bull-Call)

Strike1 Strike2
X1 X2
Instrinsic Values June 125 ./ 130
ST C1 C2 Profits Contract
75 0 0 -2.15 -215
80 0 0 -2.15 -215 Premiums
85 0 0 -2.15 -215 C1(t0) C2(t0)
90 0 0 -2.15 -215 13.5 11.35
95 0 0 -2.15 -215
100 0 0 -2.15 -215
105 0 0 -2.15 -215
110 0 0 -2.15 -215
115 0 0 -2.15 -215
120 0 0 -2.15 -215
125 0 0 -2.15 -215
130 5 0 2.85 285
135 10 5 2.85 285
140 15 10 2.85 285
145 20 15 2.85 285
150 25 20 2.85 285
155 30 25 2.85 285
160 35 30 2.85 285
165 40 35 2.85 285
170 45 40 2.85 285
175 50 45 2.85 285 Steps
180 55 50 2.85 285 0 Buy Low Strike
185 60 55 2.85 285 Sell High Strike
190 65 60 2.85 285
Steps
1 Calculate the intrinsic value of call options
2 Calculate the profit of our portfolio (Bull Spread)
3 Adjust for contract size
75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165 170 175 -215.00000000000003 -215.00000000000003 -215.00000000000003 -215.00000000000003 -215.00000000000003 -215.00000000000003 -215.00000000000003 -215.00000000000003 -215.00000000000003 -215.00000000000003 -215.00000000000003 284.99999999999994 284.99999999999994 284.99999999999994 285.00000000000011 285.00000000000011 285.00000000000011 285.00000000000011 285.00000000000011 285.00000000000011 285.00000000000011 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 160 165 170 175

X1: Strike of Low-Strike Option

X1: Strike of High-Strike Option

In this column, type all the possible stock prices you belive the stock price could have when you close your portfolio

P1: Premium of High-Strike Option

P2: Premium of Low-Strike Option

This is from https://finance.yahoo.com/quote/WMT/options/ In Yahoo Finance you can find the option prices and strikes for other stocks

https://finance.yahoo.com/quote/WMT/options/

These possible stock prices must be arranged from lower to higher

Strike and Premium (Last Price)

Money Spread (Bull-Put)

X1 X2
DCRB June 125 ./ 130
ST P1 P2 Profits Contract DCRB 130
P1(t0) P2(t0)
11.5 14.25
Steps
1 Calculate the intrinsic value of put options THIS IS A PUT BULL SPREAD
2 Calculate the profit of our portfolio (Bear Spread)
3 Adjust for contract size

Spread

Contract

Money Spread (Bear-Put)

Strikes
X1 X2
DCRB June 125 ./ 130
ST P1 P2 Profits Contract DCRB 130
Premiums
P1(t0) P2(t0)
11.5 14.25
Steps
0 Buy High Strike
Sell Low Strike
THIS IS A PUT BEAR SPREAD
Steps
1 Calculate the intrinsic value of put options
2 Calculate the profit of our portfolio (Bear Spread)
3 Adjust for contract size

Spread

Contract

Money Spread (Bear-Call)

STRIKES
X1 X2
DCRB June 125 ./ 130
ST C1 C2 Profits Contract DCRB 125
PREMIUMS
C1(t0) C2(t0)
13.5 11.35
Steps
1 Calculate the intrinsic value of call options THIS IS A CALL BEAR SPREAD
2 Calculate the profit of our portfolio (Bear Spread)
3 Adjust for contract size

Spread

Contract

Collar

Call Put Price Initial S P Long Stock
13.65 13.65 125.94 Long Put
Short Call
K Price
Robinson: Robinson: Call Strike Price 		K Price
Robinson: Robinson: Put Strike Price
136.165 120
Selling Buying Buying
Call Value Put Value ST Call Profit Put Profit Stock Profit Overall Contract Stock *100
Steps
1 Calculate the intrinsic value of options and gains from stock THIS IS A COLLAR
2 Calculate the profit of our portfolio
3 Adjust for contract size

Butterfly Spread

X1 X2 X3
DCRB June 120 125 130
C1(t0) C2(t0) C3(t0)
16 13.5 11.35
BULL SPREAD BEAR SPREAD
ST C1 C2 Profits Contract C2 C3 Profits Contract Butterfly
Steps
1 Calculate the intrinsic value of call options THIS IS A CALL BEAR SPREAD
2 Calculate the profit of our portfolio (Bear Spread)
3 Adjust for contract size

Straddle

Call Put Price Initial S P
13.5 11.5 125.94
K Price
Robinson: Robinson: Call Strike 		K Price
Robinson: Robinson: Put Strike
120 120
Call Value Put Value ST Call Profit Put Profit Overall