Construct a portfolio of 4 stocks with 2 covered calls and 2 collars (sell call and buy put strategy) ? use 10% bands for call and puts so call strike price is 10% above current price and put exercise price is 10% below current price

Calculate your portfolio beta (before and after hedge) and net exposure using the delta of your options.? Be sure that you indicate the date that you price your portfolio ? use end of day pricing.? Remember to equally weight your portfolio (doesn?t have to be exact) and use round 100 lots for your final stock positions.? Example 1250 share of ABC.? That is no good as to cover the position we could sell 12 or 13 calls (equals 1200 / 1300) shares ? so we would not fully cover or over cover our position.? So in this case just adjust the stock position to 1300 shares and then you would sell 13 calls to cover.

If every stock in your portfolio declined by 20% - how much would your portfolio lose from a dollar perspective and a percentage basis ? assume that coincides with option expiration.? Here you are recalculating your portfolio based on every underlying stock price dropping by 20%.? You have 4 positions so 2 of them you will get sold out of using your put options.? These sells will result in you accumulating cash in your account (# shares X put exercise price).? For the other 4 options the calls at expiration will be worthless so the value of your portfolio will be your 2 stocks (reduced by 20%) plus the cash from the 2 stocks that are sold plus the premium collected in the beginning.??

Same question but assume every stock increased by 20%.? Same idea here except now all 4 stocks will be called away.? Hence your final portfolio will be all cash.


Note ? use equal weighted positions, use January 2023 for all options

Try and make puts and calls =
Comment on your findings and your strategy?

It would be best to use separate worksheets to address each task.?


Thank you.?