Question
For this part, go to Yahoo Finance and download data for two stocks of your choice. Choose daily data for one year (example: from October
For this part, go to Yahoo Finance and download data for two stocks of your choice. Choose daily data for one year (example: from October 30, 2019 until October 30, 2020. Then work with the adjusted closing prices. Read your data into Excel in order to create some options strategies. For each stock, find the average price over the sample period and consider that as the Exercise price. Then generate stock prices above the mean and below the mean by $1 (say 20 prices above and 20 prices below). Then, suppose you have a call written on those stocks with a premium of 1% of the average price and 0.5% a premium for a put option. You are asked to: 1-A Create a call strategy on one of the stocks and map the profit/loss payoff (to both the long and short). B- Create a put strategy on one of the stocks and map the profit/loss payoff (to both the long and short). C-Create a straddle strategy on one of the stocks and map the profit/loss (to both the long and short). Can you think about how to create a strangle strategy if you consider the put exercise price only one dollar less than the average (think here about the exercise price)? D-Would you be able to replicate a forward contract (long or short) using the call and option contracts. Check the notes on how you can do that.
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