You are a portfolio manager who uses options positions to customize the risk profile of your clients. In each case, what strategy is best given your client's objective? a. • Performance to date: Up 16%. Client objective: Earn at least 15%. Your scenario: Good chance of large stock price gains or large losses between now and end of year. Buy a call option Write a call option Long straddle Long bullish spread Short straddle Short bullish spread Performance to date: Up 16%. b. . Client objective: Earn at least 15% with limited losses Your scenario: Good chance of large stock price losses between now and end of year. Short put options Long put options Short call options Long call options
You are a portfolio manager who uses options positions to customize the risk profile of your clients. In each case, what strategy is best given your client's objective? a. • Performance to date: Up 16%. Client objective: Earn at least 15%. Your scenario: Good chance of large stock price gains or large losses between now and end of year. Buy a call option Write a call option Long straddle Long bullish spread Short straddle Short bullish spread Performance to date: Up 16%. b. . Client objective: Earn at least 15% with limited losses Your scenario: Good chance of large stock price losses between now and end of year. Short put options Long put options Short call options Long call options
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter6: Risk And Return
Section: Chapter Questions
Problem 5MC: Your client has decided that the risk of the bond portfolio is acceptable and wishes to leave it as...
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Transcribed Image Text:You are a portfolio manager who uses options positions to customize the risk profile of
your clients. In each case, what strategy is best given your client's objective?
a.
• Performance to date: Up 16%.
Client objective: Earn at least 15%.
Your scenario: Good chance of large stock price gains or large losses between now
and end of year.
Buy a call option
Write a call option
Long straddle
Long bullish spread
Short straddle
Short bullish spread
Performance to date: Up 16%.
b. .
Client objective: Earn at least 15% with limited losses
Your scenario: Good chance of large stock price losses between now and end of
year.
Short put options
Long put options
Short call options
Long call options
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