In this project, your strategy is the butterfly option. Below is additional information to analyze your strategy.
In this project you will be given a strategy to analyze. Each strategy will be named and will have a number attached to it. You will need to research on the net the strategy for the number selected for you, and find out how you can execute it with calls and/or puts. The strike prices for the four options are given in sheet2. To execute the project you will need to use the Ch 20_Option payoffs spreadsheet as well as the ch21_Black Scholes Model spreadsheet available on Blackboard. You will need to produce the payoff at expiration and price your strategy at time zero. Assume that all the options are European, you buy all the options today and hold the positions until they expire. To price it you will have to use the stock price, volatility and risk free rate indicated in the sheet2. The time to maturity of all options is one year. After you price the strategy you will need to indicate the maximum possible payoff and profit as well as the minimum possible payoff and profit given the graphs and prices you produced in the two spreadsheets. Attach to this spreadsheet copies of each spreadsheet (use copy and paste value to have no surprises) you used to produce the result as well as a small report. The report would describe in some detail the strategy you had to analyze and summarize your results. First strike price 119 Second strike price 128 Third strike price 137 Fourth strike price* 146 *Note: the forth strike is not needed in some strategies 132.5 Stock price Voaltility Risk free rate 29 3 In this project you will be given a strategy to analyze. Each strategy will be named and will have a number attached to it. You will need to research on the net the strategy for the number selected for you, and find out how you can execute it with calls and/or puts. The strike prices for the four options are given in sheet2. To execute the project you will need to use the Ch 20_Option payoffs spreadsheet as well as the ch21_Black Scholes Model spreadsheet available on Blackboard. You will need to produce the payoff at expiration and price your strategy at time zero. Assume that all the options are European, you buy all the options today and hold the positions until they expire. To price it you will have to use the stock price, volatility and risk free rate indicated in the sheet2. The time to maturity of all options is one year. After you price the strategy you will need to indicate the maximum possible payoff and profit as well as the minimum possible payoff and profit given the graphs and prices you produced in the two spreadsheets. Attach to this spreadsheet copies of each spreadsheet (use copy and paste value to have no surprises) you used to produce the result as well as a small report. The report would describe in some detail the strategy you had to analyze and summarize your results. First strike price 119 Second strike price 128 Third strike price 137 Fourth strike price* 146 *Note: the forth strike is not needed in some strategies 132.5 Stock price Voaltility Risk free rate 29 3
