1、CFA二级Derivatives 4 TestsDerivatives - MazzaDavid Mazza is a managing director in the derivatives group at High Ridge Partners, an investment management firm. Mazza specializes in advising the firms clients on the use of derivatives in their portfolio management strategies. Mazza is preparing to meet
2、 with two of the firms clients: Andres Cevallos and Soledad Valdivia. Naohiko Kuroda, an analyst in the derivatives group, has also been asked to attend the meetings.At their meeting, Cevallos, who has been following Apple shares closely, indicates that he expects a sharp decline in the price of sha
3、res of Apple stock over the next month. Cevallos would like to use options to profit if Apple shares decline but would also like to limit his losses if his expectations are incorrect. Cevallos indicates he would also like to keep the cost of establishing this position to a minimum. Kuroda has collec
4、ted option information presented inExhibit 1and suggests that Cevallos can achieve his objective by constructing a spread strategy using the options listed in Exhibit 1. Apple currently trades at $97 per share.Exhibit 1. Data on Apple Options with March ExpirationExerciseCallPutPrice ($)PremiumPremi
5、um961.720.74990.342.56The second client, Valdivia, currently owns Caterpillar stock purchased at $60 per share and plans to hold the stock. Caterpillar stock currently sells for $67 per share.Kuroda has collected selected information on Caterpillar options presented inExhibit 2.Exhibit 2. Data on Ca
6、terpillar Options with March ExpirationExerciseCallPutPrice ($)PremiumPremium652.861.30680.831.70Caterpillar will announce earnings in the next few weeks, and Valdivia wants to protect herself against a decline in the event earnings miss consensus estimates. However, she also wants to ensure that sh
7、e is able to participate in any gains should earnings beat estimates. Kuroda recommends three possible strategies.Strategy 1:Sell March 65 call optionsStrategy 2:Buy March 65 put optionsStrategy 3:Buy March 65 put options and sell March 68 call optionsAfter discussing client portfolios, Mazza and Ku
8、roda engage in a general discussion on option strategies.Kuroda asks, “In addition to the spread strategies we discussed for Mr. Cevallos, I have heard of an options strategy called a calendar spread. When might such a strategy be appropriate?” Mazza responds, “A calendar spread would be appropriate
9、 for a trader who expects an imminent upward price movement in a stock and attempts to capture option time value from shorter dated options.”Mazza concludes the discussion by stating, “The choice of an appropriate options strategy is dependent on two factors: your views of stock volatility, relative
10、 to implied volatility, and your expectations regarding market direction. For example, if you expect high stock volatility but are neutral on direction, a long straddle would be appropriate. However, if you only expect average stock volatility and are neutral on direction, a short put would be appro
11、priate.”1 of6The strategy Kuroda recommends to Cevallos couldmost likelybe constructed by:purchasing March 96 puts and selling March 99 puts.purchasing March 96 calls and selling March 99 calls.purchasing March 99 calls and selling March 96 calls.Question2 of6Using the information provided in Exhibi
12、t 1, the breakeven price of Apple shares for a bear spread strategy using puts isclosest to:$97.18.$96.44.$98.56.Question3 of6Based on Exhibit 2, the maximum profit at expiry of a collar on Valdivias Caterpillar holding isclosest to:$0.53.$7.53.$4.53.Question4 of6Which of the three strategies listed
13、 by Kuroda ismostappropriate for Valdivia?Strategy 3Strategy 2Strategy 1Question5 of6Is Mazzas response to Kuroda regarding the spread strategymost likelycorrect?No, he is incorrect about the timing of the price move.No, he is incorrect about the capture of option time value.Yes.Question6 of6In Mazz
14、as concluding statement, he isleast likelycorrect with regard to the:choice of the short put strategy.factors impacting the choice of options strategy.choice of the long straddle strategy.Derivatives - HuangErica Huang is a derivatives trading analyst for Eastern Funds Company (Eastern). She support
15、s portfolio managers who utilize derivative instruments for their investment portfolios.Two portfolio managers have approached Huang to discuss using equity option strategies for their respective portfolios.Michael Schmidt is an equity portfolio manager for Eastern.His portfolio holds a large positi
16、on in PHL Corporation, a canning company which does not pay any dividend.Options information on PHL is presented in Exhibit 1.Exhibit 1:One Month Options on PHLPHL stock price = 100.00Call PriceStrike LevelPut Price7.4395.002.424.61100.004.602.64105.007.621.39110.0011.38Schmidt is interested in how
17、he might use options on PHL stock to both reduce risk and generate income.He states, “I believe that PHL is overpriced.I am interested in considering an options strategy which both generates income and potentially reduces the portfolios exposure to PHL.”Schmidt then asks if it is possible to use opt
18、ions to replicate the sale of PHL shares. Huang replies that, yes, it is possible to use options to create a synthetic short position. To create a synthetic short for PHL at its current stock price, Huang suggests that Schmidt sell PHL 100 Strike Calls and simultaneously purchase an equivalent numbe
19、r of PHL 100 Strike Puts.Huang suggests that Schmidt may consider purchasing Put Options to reduce risk, explaining that this strategy will enable Schmidt to retain the existing level of PHL shares in the portfolio. Schmidt agrees.Referencing Exhibit 1, Schmidt instructs Huang to create a Protective
20、 Put for PHL by utilizing an out of the money Put Option in order to minimize the cost impact to the portfolio.Lawrence Bowa sits on the trading desk to the left of Schmidt and is another equity portfolio manager for Eastern. He meets with Huang to discuss options strategies for KAW, a pharmaceutica
21、l stock.Options information on KAW is presented in Exhibit 2.Exhibit 2:Three-Month Options on KAWKAW stock price = 123.00Call PriceStrikePut Price8.01120.004.415.50125.006.883.61130.009.97Huang outlines two Options Spreads trades.For Trade 1, Huang assumes that the price of KAW will increase and sug
22、gests a Bull Spread using the 125.00 and 130.00 Strike Options. For Trade 2, Huang assumes that the price of KAW will decline and outlines three specific Bear Spread trades and suggests that Bowa consider the trade which has the lowest breakeven price.Bear Spread 1:120 and 125 Strike OptionsBear Spr
23、ead 2:120 and 130 Strike OptionsBear Spread 3:125 and 130 Strike OptionsBowa articulates his primary concern. “We have been monitoring the developments of a clinical trial which KAQ is conducting.The results of this clinical trial are expected to be announced within 30 days. We believe that there is
24、 an even probability that the clinical trial will be either successful or unsuccessful.If the clinical trial is successful, we believe that the stock price will increase considerably.If the clinical trial is not successful, we believe that the stock price will decline considerably.”Bowa asks Huang t
25、o evaluate various options strategies which best reflect this concern.1 of6With respect to Schmidts statement about PHL, the options strategy whichbestattains Schmidts objectivemost likelyis to:sell a 110 Strike Put.buy a 105 Strike Call.sell a 110 Strike Call.Question2 of6Are Huangs suggestions abo
26、ut a synthetic short positionmost likelycorrect?No, because of the sale of PHL calls.No, because of the purchase of PHL puts.Yes.Question3 of6The maximum loss and breakeven stock price for the PHL Protective Put are, respectively,closestto:2.42 and 97.585.00 and 95.007.42 and 102.42Question4 of6The
27、maximum profit and breakeven stock price from implementing Trade 1 areclosestto:5.00 and 131.895.00 and 130.003.11 and 126.89Question5 of6The breakeven stock price for Trade 2 islowest for:Bear Spread 1.Bear Spread 3Bear Spread 2.Question6 of6With respect to Bowas assessment of the KAW clinical tria
28、l, which options strategy ismostappropriate?StraddleBull SpreadBear SpreadDerivatives - ParisiRyan Parisi is a managing director in the derivatives group at High Ridge Partners, an investment management firm. Parisi specializes in advising institutional clients on the use of forward contracts in the
29、ir portfolio management strategies. Parisi is preparing a response to questions from one of the firms U.S. based clients: Leslie Sheroda.Todd Curry, an intern in the derivatives group, will assist Parisi.Leslie Sheroda oversees both equity and fixed income portfolios for a pension fund. One month (3
30、0 days) ago, Sheroda had indicated that the pension fund expected a large inflow of cash in 60 days. In order to hedge against a potential rise in equity values over this period, Parisi advised Sheroda to enter into a long forward contract on the UAX 300 Index expiring in 60 days. Sheroda determined
31、 she was also underweight in one individual stock.Sixty days ago, she entered a long forward position on CHJ common stock which does not pay a dividend.Sheroda has asked Parisi to calculate the value of her two forward positions today that is, 30 days after the contracts were initiated. Parisi has collected the information in Exhibit 1 to carry out the val
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