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Student Name:
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Introduction:
In the beginning of the Trading Simulation, we as a group decided that we want to execute mandatory strategies first and whenever the surprise strategy will be released, we will execute that strategy then. We as a group think that this way, we can achieve all the strategies and close all the positions at the end of the day. Due to COVID-19 the financial markets all around the world have been severely impacted. Thus, we have made our strategy considering the impacts of the COVID-19 and have made our choice of the options to be used accordingly. The Bank of Canada due to the impact of COVID-19 has lowered the prime rate (the rate at which banks lend money to each other). This step has led to increased liquidity in the market which in turn would have favorable impact on the financial market as well.
Bear Put Spread:
A Bear Put Spread consists of one long put with a higher strike price and one short put with a lower strike price. Both the put options have the same underlying stock and the same expiry date as well. We bought 5000 options of Air Canada at an average rate of $26.31 per option. We also sold 5000 options of Toronto-Dominion Bank with an average price of $80.71 per option. Along with these two we also sold 1000 option of ISHARES S&P with an average price of $27.78 per option.
Bull Call Spread:
A Bull Call Spread means that one long call with a lower strike price and one short call with a higher strike price but both having the same underlying stock and the same expiry as well. We purchase 50 options at an average price of $0.08 per option.
Collar:
This is the strategy used to limit the gain or loss in the option trading. This position is created by holding an underlying stock, buying a...