Options Project

Due:  Friday, February 13th 2009 (2pm).

Requirements:

3-4 Typed double-spaced pages.

You have $10,000 to allocate to three options strategies.  One must involve a combination, and one a spread.  This paper is one of two parts to this project.  This first paper must detail the transactions (account for the dollars spent on each strategy), and give the economic/financial rational for each position.  We will ignore commissions, but you must include margin requirements if you write options (you can ignore the minimum $2000 margin).  You must include a detailed calculation of the cost of each position and a clear accounting of the full $10,000.

Your economics rationale must  be more than "we just like this company...".   Tell me why the company's stock is going up or down in the next few months.

You must use options that expire in March, April or May.  Your first paper must calculate potential gains and losses, and break even points.  A second paper will follow near the end of the term.  In that paper you will calculate your gain or loss, and explain what went right or wrong and why.

You must have the Economics Secretary or myself date stamp your paper the day you price your options (I will explain this in class) and the day you close your position (you can also email me with the day and exact prices...you must email me on the day of the prices you are using). You must include a printout of the prices with your paper. 

This project will be worth 25 points.