The investment management department of your company has asked you to construct a speculative trading strategy using options.
You have been asked to invest £100,000 in options trading strategy for a single FTSE 100 or FTSE 250 non-bank, non-insurance company’s shares for the 35 working day period between Monday 9th March 2020 and also 28th April 2020 (inclusive).
a) For the company whose shares are to be the underlying for your options, set up an options-based trading strategy given your view of:
Current market sentiment regarding the segment in which it operates
Likely market movements over the period.
Firstly, you must support your analysis using real market data (suitably evidenced) as well as suitable academic literature covering analysis methods such as, for instance, economic, fundamental, technical etc.
Secondly, you must include ‘screen shot’ evidence of the source of your options pricing in an appropriately referenced appendix
b) Thirdly, what is the annualised return that you are targeting based on your approach? Assess the risk that your strategy will not produce the returns you have anticipated. You must also assess the risks that the use of an options derivative instrument has introduced to the investment management department.
(500 Words: 10 Marks)
c) Fourthly, report on the actual profit and loss of your strategy over the period and analyse its actual performance relative to its forecast performance and analyse why your strategy achieved the results observed.
(500 Words: 15 Marks)
The assignment should be in word within the limit of 2,000 words (excluding appendices, tables, charts and also graphs). The word count must be stated in the assignment. References to relevant academic theory and research findings should be provided and referenced appropriately.