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1. Fundamental Analysis a. SPY and QQQ are two index funds. What are the indices that they are tracking? Why share price of SPY or

1. Fundamental Analysis

a. SPY and QQQ are two index funds. What are the indices that they are tracking?

Why share price of SPY or QQQ is different from the value of the corresponding

index?

b. What fund has better growth? What fund is more stable? Why?

c. What are the top-10 components in SPY and in QQQ. Why some are the same?

2. Technical Analysis

study candle charts of SPY and QQQ from 1/1/2022 to 3/18/2022.

  1. Find at least 2 support and 2 resistance levels of each symbol. Explain why you think

those levels are strong ones (you should include

  1. Use RSI in 1-hour charts to find at least 3 entry points (i.e. RSI <= 30) and the 3

corresponding exit points (i.e., RSI >= 70) for each symbol.

3. Option

Assume SPY has the current price of 452. The following weekly options have the corresponding prices and greeks

Option

Price

Delta

Theta

Vega

Call 450

3.5

0.7

-0.5

0.2

Call 455

1.5

0.3

-0.4

0.15

Call 460

0.5

0.1

-0.2

0.1

Call 465

0.2

0.05

-0.1

0.05

  1. If you buy a call 450 at 3.5$/share and then SPY price goes to 453 right after that,

what is your profit? What is the return on investment (ROI)?

If SPY stops at 456 at expiration, what is your profit or loss?

  1. If you buy a call 455 at 1.5$/share instead of call 450 and SPY goes to 453 the same

way. What is the profit and ROI? Compare to case a, do you have better ROI?

If SPY stops at 456 at expiration, what is your profit or loss?

  1. If you buy a call 450 at 3.5$/share and then SPY price stays around 452 the next day,

do you have any loss? (Hint: time decay)

If SPY price stays at 452 until expiration, what is your profit or loss?

  1. To reduce time decay, you decide to buy 1 call 450 and sell a call 455 (a debit call

spread). What is your loss if SPY stays around 452 the next day?

If SPY stops at 454 at expiration, what is your profit or loss?

  1. To exploit the time decay, you decide to buy a butterfly: buy 1 call 450, sell 2 call 455, and buy a call 460. If SPY stays around 452 the next day, do you have a loss or a profit?

If SPY stops at 456 at expiration, what is your profit or loss?

  1. To exploit the time decay, you decide to sell a credit call spread: buy a call 465 and sell a call 460.

What is your maximal profit? At what price of SPY? What is the probability that you will win that profit?

What is your maximal loss? At what price of SPY? What is the probability that you will lose that much?

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