The investment management department of your company has asked you to construct a speculative trading strategy using options. You have been instructed to invest £100,000 in an options trading strategy for a publicly traded company’s shares for the period between 25th February 2022 and 15th April 2022 (inclusive). You are encouraged to use European options for UK-listed companies from the non-financial sector, however this is not a requirement.
Instructions on Assessment:
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.
The investment management department of your company has asked you to construct a speculative trading strategy using options. You have been instructed to invest £100,000 in an options trading strategy for a publicly traded company’s shares for the period between 25th February 2022 and 15th April 2022 (inclusive). You are encouraged to use European options for UK-listed companies from the non-financial sector, however this is not a requirement.
Section A: (1000 words, 35 marks)
For the company whose shares are to be the underlying for your options, set up a speculative option-based trading strategy 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-world market data (appropriately evidenced) as well as suitable academic literature covering analysis methods such as, for instance, macroeconomic, news, fundamental, technical, etc. You must include screenshot evidence of the source of your options pricing in an appendix and discuss how the strategy you are proposing is consistent with your share price forecast and market outlook.
Out of 35 marks awarded for Section A, 25 marks are allocated to your forecasting of the underlying and 10 marks are allocated to the justification of the speculative option strategy consistent with such a forecast.
Section B: (500 words, 10 marks)
What is the payoff structure of the strategy you have suggested and what is the annualised return you are targeting based on your approach? Assess the risk that your strategy will not produce the returns you have anticipated. You must also discuss and evaluate the risks that the use of an options derivative instrument has introduced to the investment management department.
Section C: (500 words, 15 marks)
Report on the actual profit and loss of your strategy over the period and analyse its realised performance relative to your forecast. Discuss why the strategy achieved the observed results.
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Assessment Brief
Mapping to Programme Goals and Objectives
| Knowledge and Understanding | |
| Apply knowledge of contemporary professional practice in business and management informed by theory and research. | X |
| Apply knowledge of business and management to complex problems in or related to professional practice in order to identify justifiable, sustainable and responsible solutions. | X |
| Intellectual and Professional Skills and Abilities | |
| Apply effective interpersonal communication skills and the ability to work in multi-cultural teams. | |
| Produce evidence of self-reflection as a means of informing personal development planning. | X |
| Demonstrate skills and attitudes for progression to post-graduate contexts including professional work, entrepreneurship and higher-level study. | X |
| Personal Values Attributes (Global and Cultural Awareness, Ethics, Curiosity) | |
| Develop an awareness of the cultural and ethical contexts in which international business operates. | |
Module Specific Assessment Criteria and Rubric
Section A:
| Grade | Description |
| 0-9 | No real attempt made. |
| 10-19 | Demonstrates extremely poor understanding of the underlying; its likely price dynamics; of forecasting techniques; of derivatives theory; of appropriate trading strategies. Materials presented may have significant omissions. |
| 20-29 | A poor attempt showing little understanding of the underlying; its likely price dynamics; of forecasting techniques; of derivatives theory; of appropriate trading strategies. Materials presented may have omissions. |
| 30-39 | A fair attempt that is however showing substantial limitations in understanding of the underlying; its likely price dynamics; of forecasting techniques; of derivatives theory; of appropriate trading strategies. Materials presented may be very limited. |
| 40-49 | A reasonable attempt that shows some engagement with the task and demonstrates understanding of the underlying; its likely price dynamics; of forecasting techniques; of derivatives theory; and of appropriate trading strategies that is sufficient to pass. Materials presented may be superficial, inaccurate, or contain substantive errors. |
| 50-59 | A good attempt that shows engagement with the task and demonstrates necessary knowledge of the underlying; its likely price dynamics; of forecasting techniques; of derivatives theory; of appropriate trading strategies. However, the presentation is more descriptive than analytical. Materials presented may contain some errors. |
| 60-69 | A very good attempt that shows engagement with the task and demonstrates knowledge and understanding of the underlying; its likely price dynamics; of forecasting techniques; of derivatives theory; of appropriate trading strategies. The presentation could have been more consistently analytical rather than descriptive. Materials presented may contain minor errors. |
| 70-79 | An excellent attempt that shows engagement with the task and demonstrates in-depth knowledge and understanding of the underlying; its likely price dynamics; of forecasting techniques; of derivatives theory; of appropriate trading strategies. High presentation standard, rigorous analysis employed and properly evidenced with relevant materials. |
| 80-89 | An outstanding attempt showing continuous engagement with the task and demonstrating in depth knowledge and understanding of the underlying; its likely price dynamics; of forecasting techniques; of derivatives theory; of appropriate trading strategies. Very high presentation standard, rigorous analysis employed and properly evidenced with relevant materials. |
| 90-100 | An attempt that would be of a standard of a valuable investment manager. An exceptionally researched and analysed piece of work justifying the speculative option trading strategy. Exemplary standard of presentation, in-depth rigorous analysis, very professional. |
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Assessment Brief
Section B:
| Grade | Description |
| 0-9 | No real attempt made. |
| 10-19 | Demonstrates extremely poor understanding of the payoff structure, risk and return of the strategy; as well as the representation and management of risks introduced with the use of derivatives in general. Materials presented may have significant omissions. |
| 20-29 | A poor attempt showing little understanding of the payoff structure, risk and return of the strategy; as well as the representation and management of risks introduced with the use of derivatives in general. Materials presented may have omissions. |
| 30-39 | A fair attempt that is however showing substantial limitations in understanding of the payoff structure, risk and return of the strategy; as well as the representation and management of risks introduced with the use of derivatives in general. Materials presented may be very limited. |
| 40-49 | A reasonable attempt that shows some engagement with the task and demonstrates understanding of the payoff structure, risk and return of the strategy; as well as the representation and management of risks introduced with the use of derivatives in general. Materials presented may be superficial, inaccurate, or contain substantive errors. |
| 50-59 | A good attempt that shows engagement with the task and demonstrates necessary knowledge of the payoff structure, risk and return of the strategy; as well as the representation and management of risks introduced with the use of derivatives in general. However, the presentation is more descriptive than analytical. Materials presented may contain some errors. |
| 60-69 | A very good attempt that shows engagement with the task and demonstrates knowledge and understanding of the payoff structure, risk and return of the strategy; as well as the representation and management of risks introduced with the use of derivatives in general. The presentation could have been more consistently analytical rather than descriptive. Materials presented may contain minor errors. |
| 70-79 | An excellent attempt that shows engagement with the task and demonstrates in-depth knowledge and understanding of the payoff structure, risk and return of the strategy; as well as the representation and management of risks introduced with the use of derivatives in general. High presentation standard, rigorous analysis employed and properly evidenced with relevant materials. |
| 80-89 | An outstanding attempt showing continuous engagement with the task and demonstrating in depth knowledge and understanding of the payoff structure, risk and return of the strategy; as well as the representation and management of risks introduced with the use of derivatives in general. Very high presentation standard, rigorous analysis employed and properly evidenced with relevant materials. |
| 90-100 | An attempt that would be of a standard of a valuable investment manager. An exceptionally researched and analysed piece of work presenting and discussing risk and target return of the option strategy. Exemplary standard of presentation, in-depth rigorous analysis, very professional. |
Section C:
| Grade | Description |
| 0-9 | No real attempt made. |
| 10-19 | Demonstrates extremely poor understanding of the realised performance of the strategy and the macroeconomic, sectoral, market, and other factors of its out- or underperformance. Materials presented may have significant omissions. |
| 20-29 | A poor attempt showing little understanding of the realised performance of the strategy and the macroeconomic, sectoral, market, and other factors of its out- or underperformance. Materials presented may have omissions. |
| 30-39 | A fair attempt that is however showing substantial limitations in understanding of the realised performance of the strategy and the macroeconomic, sectoral, market, and other factors of its out- or underperformance. Materials presented may be very limited. |
| 40-49 | A reasonable attempt that shows some engagement with the task and demonstrates understanding of the realised performance of the strategy and the macroeconomic, sectoral, market, and other factors of its out- or underperformance. Materials presented may be superficial, inaccurate, or contain substantive errors. |
| 50-59 | A good attempt that shows engagement with the task and demonstrates necessary knowledge of the realised performance of the strategy and the macroeconomic, sectoral, market, and other |
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Assessment Brief
| factors of its out- or underperformance. However, the presentation is more descriptive than analytical. Materials presented may contain some errors. | |
| 60-69 | A very good attempt that shows engagement with the task and demonstrates knowledge and understanding of the realised performance of the strategy and the macroeconomic, sectoral, market, and other factors of its out- or underperformance. The presentation could have been more consistently analytical rather than descriptive. Materials presented may contain minor errors. |
| 70-79 | An excellent attempt that shows engagement with the task and demonstrates in-depth knowledge and understanding of the realised performance of the strategy and the macroeconomic, sectoral, market, and other factors of its out- or underperformance. High presentation standard, rigorous analysis employed and properly evidenced with relevant materials. |
| 80-89 | An outstanding attempt showing continuous engagement with the task and demonstrating in depth knowledge and understanding of the realised performance of the strategy and the macroeconomic, sectoral, market, and other factors of its out- or underperformance. Very high presentation standard, rigorous analysis employed and properly evidenced with relevant materials. |
| 90-100 | An attempt that would be of a standard of a valuable investment manager. An exceptionally researched and analysed piece of work discussing and interpreting your strategy performance. Exemplary standard of presentation, in-depth rigorous analysis, very professional. |
ASSESSMENT REGULATIONS
You are advised to read the guidance for students regarding assessment policies. They are available online here.
Late submission of work
Where coursework is submitted without approval, after the published hand-in deadline, the following penalties will apply.
For coursework submitted up to 1 working day (24 hours) after the published hand-in deadline without approval, 10% of the total marks available for the assessment shall be deducted from the assessment mark.
For clarity: a late piece of work that would have scored 65%, 55% or 45% had it been handed in on time will be awarded 55%, 45% or 35% respectively as 10% of the total available marks will have been deducted.
Coursework submitted more than 1 day (24 hours) after the published hand-in deadline without approval will be marked as zero but will be eligible for referral. The reassessment should where appropriate, and as determined by the Module Leader, be the same method and the same task as indicated in the Module handbook.
In modules where there is more than one assessment component, Students are not required to complete all assessment components if an overall Pass Mark (40%) has been achieved.
In modules, where there is more than one assessment component and an overall pass mark has not been achieved, Students will be eligible for a referral* in the individual failed module and/or not attempted component(s) of assessment.
These provisions apply to all assessments, including those assessed on a Pass/Fail basis. The full policy can be found here.
Word limits and penalties
If the assignment is within +10% of the stated word limit no penalty will apply. For this assignment, it implies if the declared word count of the work is not higher than 2,200 words (2,000 words + 10%), no penalty applies.
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Assessment Brief
The word count is to be declared on the front page of your assignment and the assignment cover sheet. The word count does not include tables, charts, appendices, footnotes, tables, and the reference list. Please note, in text citations [e.g., (Smith, 2011)] and direct secondary quotations [e.g., “dib-dab nonsense analysis” (Smith, 2011 p.123)] are INCLUDED in the word count.
If this word count is falsified, students are reminded that under ARTA this will be regarded as academic misconduct.
If the word limit of the full assignment exceeds the +10% limit, 10% of the mark provisionally awarded to the assignment will be deducted. For example: if the assignment is worth 70 marks but is above the word limit by more than 10%, a penalty of 7 marks will be imposed, giving a final mark of 63.
Students must retain an electronic copy of this assignment (including ALL appendices) and it must be made available within 24 hours of them requesting it be submitted.
The full Word Limit Policy is available here.
Group Work
The group work policy can be found here
Academic Misconduct
The Assessment Regulations for Taught Awards (ARTA) contain the Regulations and procedures applying to cheating, plagiarism and other forms of academic misconduct.
The full policy is available at here
You are reminded that plagiarism, collusion and other forms of academic misconduct as referred to in the Academic Misconduct procedure of the assessment regulations are taken very seriously. Assignments in which evidence of plagiarism or other forms of academic misconduct is found may receive a mark of zero.
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