How does Brexit affect the derivatives market/buy write strategy?.
Introduction: BREXIT ° Introduction, timeline, any other particulars. ° Brief of research paper. DERIVATIVE MARKETS ° What are derivatives ° Types of derivatives I) types: options, future, forward ( define diagrams, and strategy). ° Focus on buy-write. Critical Analysis: 1) °Overall picture- increase in uncertainty, need for derivatives to hedge risk – relate to risk side – diamond risk? °Specific sectors – positive affected, negatively affected – relate to return side. °Price expected to rise – call options °Price expecres to fall – put options °Mixed reaction – mixing puts and calls. 2) a) BWS is like a covered call. Its broken down as follows: Buy one stock and write an out of money option on the stock. b) Brexit bring winners and losers for certain sectors. The biggest loser is the banking sector for example. c) It means the value of the equity stock will drop and investors will not exercise their call option. Net effect will be loss on the physical asset but cash in on the premium on the call option. The net loss on the BWS will thus be smaller when compared to the loss on just having the banking stock. d) the reverse is true for winning sectors. e) BWS is like a covered call whereby the difference is we are dealing with deep out of money call option 3) °Long/Short straddle, Bull/Bear/Butterfly spreads. °Diagrams °Future, Forwards? Conclusion °strong case for why derivatives are important in context of Brexit.How does Brexit affect the derivatives market/buy write strategy? Academic Level : Bachelor Paper details Introduction: BREXIT ° Introduction, timeline, any other particulars. ° Brief of research paper. DERIVATIVE MARKETS ° What are derivatives ° Types of derivatives I) types: options, future, forward ( define diagrams, and strategy). ° Focus on buy-write. Critical Analysis: 1) °Overall picture- increase in uncertainty, need for derivatives to hedge risk – relate to risk side – diamond risk? °Specific sectors – positive affected, negatively affected – relate to return side. °Price expected to rise – call options °Price expecres to fall – put options °Mixed reaction – mixing puts and calls. 2) a) BWS is like a covered call. Its broken down as follows: Buy one stock and write an out of money option on the stock. b) Brexit bring winners and losers for certain sectors. The biggest loser is the banking sector for example. c) It means the value of the equity stock will drop and investors will not exercise their call option. Net effect will be loss on the physical asset but cash in on the premium on the call option. The net loss on the BWS will thus be smaller when compared to the loss on just having the banking stock. d) the reverse is true for winning sectors. e) BWS is like a covered call whereby the difference is we are dealing with deep out of money call option 3) °Long/Short straddle, Bull/Bear/Butterfly spreads. °Diagrams °Future, Forwards? Conclusion °strong case for why derivatives are important in context of Brexit.
How does Brexit affect the derivatives market/buy write strategy?