Lujiazui Hedge Fund Inc.Ryota ArafukaKuang-Po LeeKrunal NaikJiaqi Wang
Relative Valuation
Historical Stock Price of Coach Inc.
St(1) X Cx(2)Volatility(%) θ β ΔBid-AskSpreadSharesCallPremiumCoach 53.71 60.0 1.80 37.50 -0.0196 1.29 0.3084 0.05 1861 33...
Expected Payoffs (St +/- 2%)
X higherΔc lowerΔpos higher
Comparative Analysis of Calls with Different X
Covered Call (CC) Strategy• Exercise Price: $60• Maturity Date: Jan. 13• Theta: -0.0196• Delta of Position: 0.6916
57.469.1151.25Breakeven Terminal Price
Breakeven terminal stock price for losing money (with CC)Price % VariationUpside 69.1 28.65%Downside 51.25 -4.58%Breakeven...
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Covered call strategy to invest $100,000 for short duration position

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Covered call strategy to invest $100,000 for short duration position

  1. 1. Lujiazui Hedge Fund Inc.Ryota ArafukaKuang-Po LeeKrunal NaikJiaqi Wang
  2. 2. Relative Valuation
  3. 3. Historical Stock Price of Coach Inc.
  4. 4. St(1) X Cx(2)Volatility(%) θ β ΔBid-AskSpreadSharesCallPremiumCoach 53.71 60.0 1.80 37.50 -0.0196 1.29 0.3084 0.05 1861 3349ExxonMobile91.03 95.0 0.91 13.36 -0.0109 0.83 0.2816 0.03 1098 999Facebook19.52 25.0 0.55 54.86 -0.0112 N.A. 0.5582 0.05 5122 2817Pfizer 25.12 26.0 0.36 14.79 -0.0036 0.66 0.3418 0.01 3980 1432Starbucks47.18 52.5 0.76 25.58 -0.0097 0.88 0.2303 0.02 2119 1610(1) Date : Oct 13th(2) Expiration date : Jan 13thData Comparison
  5. 5. Expected Payoffs (St +/- 2%)
  6. 6. X higherΔc lowerΔpos higher
  7. 7. Comparative Analysis of Calls with Different X
  8. 8. Covered Call (CC) Strategy• Exercise Price: $60• Maturity Date: Jan. 13• Theta: -0.0196• Delta of Position: 0.6916
  9. 9. 57.469.1151.25Breakeven Terminal Price
  10. 10. Breakeven terminal stock price for losing money (with CC)Price % VariationUpside 69.1 28.65%Downside 51.25 -4.58%Breakeven terminal stock price for making less money than stockUpside 57.4 6.87%Downside None NoneProbability of more money than just a stock for +/- 15% range(with CC, St = 45.65 to 61.76)72.99% -Probability of making money in +/- 15% range(with CC, St = 45.65 to 61.76)65.11% -Conclusions

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