Option Hedging Strategies

Select a stock from the S&P 500 index. and bring up its equity screen. Using the Bloomberg OSA screen, select several call and put options on the stock to form up the following two strategies:

Bull Call Spread: Long in call with low X and short in call with high X

Bear Put Spread: Long in put with high X and short in put with low X

Write a section to evaluate the two option strategies on the stock with a profit graph/table.

In each strategy, set your starting position for the stock to 100,000 (e.g., number of stocks is set to 100,000). On the OSA screen, input the starting position (=10,000) for the stock. Decide number of calls and puts you intend to long/short, add the number of calls/puts on the OSA screen to form up each strategy. Remember attaching the relevant Bloomberg screenshots in your report to demonstrate what you have done. Explain the rational behind this.

Select a period in which you would have taken the strategy (as you believe implementing the strategy is going to lead to a profit) and calculate the profit generated from opening and closing at the call/put prices for your selected period.