Question
The S&P 500 is currently valued at 3,600. Roberts advisors have convinced him that the market is about to experience a period of considerably high
The S&P 500 is currently valued at 3,600. Roberts advisors have convinced him that the market is about to experience a period of considerably high volatility as the S&P 500 index might go up or down by more than 30% in the next couple of months.
A. Define one option strategy that Robert can use to exploit this prediction. (5 Marks)
B. Describe in detail the gains and losses of this strategy using a recent option chain from Yahoo finance. Present the option chain that you chose and use graphical analysis to show how your profits vary with different S&P 500 levels. Note: Graph(s) should be part of your answer in the PDF file. Calculations should be made on an Excel sheet that is submitted along with the PDF file. (20 Marks)
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