FN0263 – Derivatives and Risk

Posted on August 2, 2022 by Cheapest Assignment

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Identifying Themes and Concerns to Support Strategic

Instructions on Assignment:


The assignment is an individual written piece of work (as opposed to a piece of written group work) and you are required to answer all three elements of the question.

1. The investment management department of your company has asked you to construct a speculative trading strategy using options. You have been asked to invest £100,000 in options trading strategy for
a single FTSE 100 or FTSE 250 non-bank, non-insurance company’s shares for the 35 working day period between Monday 19th February and 13th April (inclusive). The department has stipulated that your choice of strategies as one of either a:
1. Protective Put, or 2. Covered Call
a) For the company whose shares are to be the underlying for your options, set up an options-based
trading strategy (from the choices 1 or 2 above) given your view of:
» the company,
» current market sentiment regarding the segment in which it operates, and
» likely market movements over the period.

You must support your analysis using real market data (suitably evidenced) as well as suitable academic literature covering analysis methods such as, for instance, economic, fundamental, technical etc.
You must include ‘screen shot’ evidence of the source of your options pricing in a properly referenced appendix.

Describe the reasons why your chosen strategy is appropriate for the company you have identified and researched. Present the expected profit/loss of your trading strategy using both a table and a graph.

b) What is the annualised return that you are targeting based on your approach? Assess the risk that your strategy will not produce the returns you have anticipated. You must also assess the risks that the use of an options derivative instrument has introduced to the investment management department.

c) Report on the actual profit and loss of your strategy over the period and analyse its actual performance relative to its forecast performance and analyse why your strategy achieved the results observed.

The assignment should be word processed within the limit of 2,000 words (excluding appendices, tables, charts and graphs). The word count must be stated in the assignment. References to relevant academictheory and research findings should be provided and referenced appropriately.

Assessment Brief – Level Five Undergraduate

Important note about ARNA regulations

The regulations specify that students must complete every assessment component contributing to the modules
on their programme. This applies to all forms of assessment as defined in the module descriptor. Please note

  • if any assessment component is not completed, students will be failed in the module even if the module pass mark has been achieved;
  • if the requirements for referral specified in section 3 of ARNA1 are met, a resit opportunity will be given;
  • if unable to complete an assessment component because of extenuating circumstances, students should follow the procedure described in the Student Guide to Extenuating Circumstances1

This change has applied since September 2013 and was approved by Academic Board in consultation with the Students’ Union. Students should consult their Programme Leader or Guidance Tutor if they have any queries. Independent advice and support is also available from the Students’ Union Advice & Representation Centre (su.advice@northumbria.ac.uk) or from a student adviser in Student Services.


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