Analysis of Plain Vanilla and Combined Option Strategies - Essay Example

Only on StudentShare

Extract of sample
Analysis of Plain Vanilla and Combined Option Strategies

Such buying or selling may take place on either a set date or a time before the date. The contract that enables such kind of financial trading to take place is referred to as option. There are several option strategies that may be used by the seller. Studies have actually showed that how careful a seller is in selecting an option goes a long way to determine the success of the transaction. This study gives emphasis to two of these option strategies namely plain vanilla and combined options. 1 Problem Definition and Objective The recent development of financial markets is connected with growing uncertainty of market participants. The current conflict in Syria, contrary expectations on the start of the Fed’s reduction of the quantitative easing program as well as mixed signs on economic growth in the US and Europe, are fueling investors fears. ...
Download paper

Summary

Project Paper Fall Term 2013 Analysis of Plain Vanilla and Combined Option Strategies Name: Address: Submitted to: Submission Date: Table of Contents Table of Contents 1 List of abbreviations 1 List of figures and tables 2 1Introduction 3 1Problem Definition and Objective 3 2Course of the Investigation 3 2Theoretical Framework of Options 5 1Definition and Delimitation of the term “Option” (des Optionsbegriffs) 5 2Characteristics of Options 5 3Main Factors Influencing the Option Price 6 3Conception of the four Plain Vanilla Strategies 8 1Long Call 8 2Short Call 9 3Long Put 9 4Short Put 10 4Introduction to Combined Option Strategies 11 1Covered Call 11 2Protective Put 11 3Straddle 12 4Stran…
Author : lynchenrique

Related Essays

Finance and Accounting Essay: Option Pricing
The loss that amounts is in the loss of cash or amount paid for the option. Determinants of an option are stated as stock price, volatility, strike price, risk free (short term) interest rate and time to the expiration. The contract in this case, is called the option contract (Don, 2004, 142). Options are used by holders for leverage or for protection. The leverage function helps the holder to control the shares bought for a portion what they would have cost. On the other hand, protection measures are adopted when the holder wants to guard against price fluctuations. He enters in to a contract...
12 pages (3012 words) Essay
Finance and Growth Strategies
The paper tells that dividends are returns which are paid to the shareholders from the firm’s earnings for their investment in the company regardless of whether the earnings are generated in previous period or the current period. Dividends will influence the capital structure of the firm since retained earnings increase the value of the common stock than debt capital. A firm cannot assume the dividend policy to be irrelevant. In determining the amount to be paid as dividends, the firm should analyze the effect of the dividend policy on the operations of the. However, some financial analysts...
11 pages (2761 words) Assignment
Option Pricing Model in Valuing a Company in the Context of Pfizer
His constant guidance and positive attention helped researcher to concentrate more on the research topic. The researcher would also like to thank his other professors for acting as a support system when required along with helping and guiding when needed and required. The support and cooperation of the University in allowing access to the library helped in referring to different study materials that further help in understanding the research topic in a sound manner. The researcher would also like to thank his family for being there as a strong support system often guiding and supporting along...
40 pages (10040 words) Dissertation
Marketing strategies
In order to find the strategies and evaluate the factors which will help Murgitroyd to grab the market share at China and expand their business in the next 24 months the company’s strength, weakness, opportunities and threats are evaluated which will help the company to implement their strategies successfully. The global market opportunities are assessed by finding the sales potential in the market. The foreign market sustainability of the products is also needed to be done to find whether the product is suitable for the target market or not. Screening the potential market is the next step...
16 pages (4016 words) Coursework
Option Pricing Theory
An option provides the buyer the right to buy or sale the quantity of goods he or she wants at a fixed price known as the strike price. Since the process of buying an option is optional, the holder can choose not to buy or sale the assets. There are two options these are; right to buy and right to sale. Options can come in several varieties like; a put option, gives the seller an underlying price to sale an option (Bostock, 2004). A call option gives its holder the right to buy an option on its set price; these options depend on when the option is offered. Therefore, the paper aims at giving a...
8 pages (2008 words) Essay
The Value of a Vanilla Bond
Between the two companies it has been observed that Microsoft Corp. has the highest credit rating in the country. Due to the volatility of Aon’s operations and lower credit ratings, interest rates are higher, which makes the investment in Microsoft Corp. safer than that in Aon Corp, from an investor’s point of view. The Value of a Vanilla Bond A vanilla bond is a bond that has no underlying features, a fixed rate is implied and the bond is redeemable in full on maturity. In this paper, the vanilla bonds of two companies will be focused on to determine why the price of one company’s bonds...
4 pages (1004 words) Coursework
Finance - Hedging Strategies
The essence of hedging strategies is to reduce business risks while deterring the creation of additional risks. Multinational firms encounter a multitude of risks, particularly as a result of their competitive exposures across the globe. General Motors has along experienced competitive exposure due to the Japanese yen. This exposure has a lot to do with the depreciating Japanese yen. However, the company is yet to establish clear guidelines to deal with the competitive risk caused by the yen’s continued depreciation. In essence, the company’s hedging strategies do not provide lucid hedging...
3 pages (753 words) Assignment
Got a tricky question? Receive an answer from students like you! Try us!