Class 13 Outline Hedging Using Options and Futures

Class 13 Outline Hedging Using Options and Futures - Class...

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Class 13 Outline Hedging Using Futures and Options: 1) Review concept of hedging and answer questions a. A hedge requires a position in a derivative or secondary asset (S) whose value moves in the opposite direction of the underlying or primary asset (P). a.i. P: User of jet fuel S: buy crude oil futures a.ii. P: Farmer plants corn S: Sell a corn futures a.iii. P: long a T-Bond S: short a T-Bond Futures or buy a Put on T-Bond Futures 2) Review the SUNW option Hedge sample Problem SUNW Option Hedge The following Tables give information about Sun Microsystems Stock and Mar 01options as Nov 7, 2000 . Answer the questions below the tables. Symbol Last Trade Change Volume More Info SUNW 1:29PM 109 3 / 8 +5 3 / 8 +5.17% 12,562,400 Chart , News , Msgs , Profile Research , Insider , Options Calls Strike Price Puts Symbol Last Trade Chg Bid Ask Vol Open Int Symbol Last Trade Chg Bid Ask Vol Open Int SUXKS. X 17 +3 7 / 8 15 7 / 8 16 7 / 8 114 2,085 95 SUXWS.X 2 1 / 4 -1 1 / 4 2 1 / 8 2 1 / 2 1,320 7,719 SUXKJ.X 12 5 / 8 +2 3 / 4 12 12 3 / 4 183 5,907 100 SUXWJ.X 3 1 / 4 -1 7 / 8 3 1 / 4 3 5 / 8 247 7,600 SUXKA. X 9 1 / 8 +1 7 / 8 8 3 / 4 9 1 / 4 631 5,375 105 SUXWA.X 4 3 / 4 -2 5 / 8 4 3 / 4 5 1 / 8 634 10,128 SUXKB. X 6 3 / 8 +1 5 / 8 6 6 1 / 2 667 14,876 110 SUXWB.X 6 7 / 8 -3 1 / 4 6 7 / 8 7 3 / 8 133 6,460 SUXKC. X 3 7 / 8 + 3 / 4 3 7 / 8 4 1 / 4 715 7,948 115 SUXWC.X 14 0 9 5 / 8 10 1 / 8 0 2,470 SUXKD. X 2 7 / 16 + 11 / 16 2 1 / 4 2 7 / 16 770 12,963 120 SUXWD. X 12 1 / 2 -5 1 / 2 12 3 / 4 13 1 / 2 15 1,541 SUXKE. X 1 1 / 4 + 3 / 16 1 1 / 8 1 3 / 8 1,156 15,297 125 SUXWE.X 21 0 16 1 / 2 17 1 / 2 0 1,156 Symbol Last Trade Change Volume More Inf o Trade SUNW Mar 16 36 3 / 8 + 1 / 8 +0.69 % 53,056,40 0 Chart , News , Msgs , Profile Research , Insider , Options Choose Brokerage
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a) What does one acquire by writing a put? b)
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This note was uploaded on 02/22/2012 for the course MANEC 453 taught by Professor Jerrynelson during the Winter '10 term at BYU.

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Class 13 Outline Hedging Using Options and Futures - Class...

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