Economics Homework Help

1. Pick one stock you are interested in to analyze.

2. Estimate the future price for this stock. Just give a guess with some brief reasoning according to your instincts or personal insights on this stock. No modeling (such as Monte Carlo simulation) needs to be done for this estimation. Briefly document this part in report.

3. Based on your estimation in Part 2, construct a trading strategy involving the option(s) of the stock you pick. Select appropriate call option(s) and/or put option(s), maybe together with the stock itself to form this strategy. This strategy cannot be simply longing one call, longing one put, shorting one call, or shorting one put. Collect all relevant information from Yahoo! Finance.

4. In Word, fill out the payoff/profit table, calculate maximum profit, maximum loss, and break-even price for the strategy you construct in Part 3.

5. In Excel, generate the payoff/profit charts for the strategy you construct in Part 3. Include all the calculation details in Excel as the basis to create the chart. Include the chart in Word.

6. Write a brief report in the Word file. Based on what you get previous steps, explain the rationale of constructing your trading strategy.

7. Submit both Excel file (with your detailed modeling) and Word file (with your report).

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