Trades

Trading Simulation Report

Message

The purpose of the memorandum is to discuss the rational behind future and option trading done through the trading simulation tool over the course of the Fall 2010 semester. The discussion will include the rationale for each of the 35 trades and review the position, contract size, and results from opening and closing the transactions. Please note that the following pages are chronological laid out and grouped by strategy.

Strategy 1

Entered into a bull spread on FAZ, which is a leveraged ETF shorting the financial stocks, in the belief that the continued political environment would affect the financial sector in terms of stricter regulations and reform. The underlying price when the positions were opened was $12.59 per share, and its ending price per share was $11.78. The underlying’s performance was down during the period by the option positions expired with a loss of $4,440.00 including commissions.

Strategy 2

Entered into a bear spread on FAS, which is a bullish leveraged ETF long the financial stocks. The underlying security's price per share was $22.53 and closed 11/21/2010 at $23.01. From the assumptions I mentioned in the trade above, my belief that the discussion and uncertainty of regulatory reform from Washington would negatively impact the financial sector. Based on that judgment, the sector did appear to have price changes when news did break on the subject, however, from news articles financial sector firms have already begun to reduce their use of products which would be considered to have additional regulation imposed upon it in the near future.

Strategy 3

Apple inc. designs, manufacturers, and markets consumer computers, and has developed propriety operating systems. Firm revenue is derived from hardware sales of notebook and desktop computers, the iPhone and iPad. Based on a price objective of $415 per share derived from multiplier valuation, I execute 100 January 2011 calls at a...