Investment Management (option) Revised

Product Structure (Hedging Index by Option)

TUGAS: MENCARI SARANA INVESTASI YANG MEMILIKI KARAKTERISTIK: MINIMUM POTENTIAL LOSS UNLIMITED POTENTIAL PROFIT

KEY POINT

OPTION 

Bodie, Kane & Marcus: A call option give its holder the right to purchase an asset for a specified price (called strike price or exercise price) on or before some specified expiration date. A put gives its holder the right to sell an asset for a specified strike price on or before some expiration date.

WHY OPTION INTERESTING MANY INVESTORS?

 OPTION

PROVIDES Loss in premium only BUT Unlimited potential profit

OPTION PAYOFF

+ Call premium - Call premium

K

ST

OPTION PAYOFF

+ Put premium K

ST - Put premium

OPTION STRATEGY

PROTECTIVE COLLAR

PROTECTIVE PUT (SELECTED)

INVESTMENT STRATEGY   

FUND = $120 million SPX at level 1200 Number of Put contract = hedged fund put = current SPX aggregate value $120 million put = 1200x$100 put = 1000 contract

INVESTMENT STRATEGY  Buy

index put option $1200 strike price, 30 days expiration, cost $25. Cost of investment: 1000 x $25 x $100 = $ 2.5million

PAYOFF PROTECTIVE PUT

CONCLUSION  PROTECTIVE

PUT PROVIDES LIMITED POTENTIAL LOSS AND UNLIMITED POTENTIAL PROFIT  PROTECTIVE COLLAR IS LIKELY AS PROTECTIVE PUT IN PROTECTING DOWNSIDE RISK BUT PROTECTIVE COLLAR PROFIT IS LIMITED BY LOSS IN WRITING COLLAR

THE END

Product Structured 

Buy