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**Part A (10 marks)**

From the implied volatility data across different strike prices provided for the period 1^{st} January 2021 to 15^{th} August 2021, determine the directional bias and potential price swings expected in the market. You are required to, at a minimum:

- select an appropriate delta to plot the put-call ratio for the period 1
^{st}January 2021 to 15^{th}August Explain your choice of delta. (3 marks) - analyze the put-call ratio graph to determine the market expectation for the period of 16
^{th}August – 30^{th}August 2021. Explain your findings and how that lead to your conclusion of whether the market is likely to be bullish, bearish or (4 marks) - plot the volatility skew or smile on the 16
^{th}Assuming the At-The-Money options (45 – Delta) are fairly valued, explain the implications of the volatility skew/smile and how that influence your choice of option strategy. (3 marks)

**Part B (9 marks)**

Based on your analysis in Part A, execute an option strategy for the period 16^{th} August to 30^{th} August 2021 to capitalise on the opportunity presented. You are required to, at a minimum:

- determine an option strategy appropriate to your analyses in Part A. Explain your choice of the strategy and its execution. (5 marks)
- tabulate and evaluate the performance of the strategy in terms of risk and return, and potential (4 marks)

**Part C (9 marks)**

Assume $1,000,000 fully invested in the relevant stock on the 16^{th} of August. Based on the market expectation determined in part A, implement a futures hedging strategy for the period 16^{th} August to 30^{th} August 2021. You are required to, at a minimum:

- implement the futures hedging Explain the strategy and its execution, and how that is appropriate to your analyses in Part A. (5 marks)
- tabulate and evaluate the performance of the strategy in terms of risk and return, and potential (4 marks)

**Report writing and presentation (2 marks)**

Your report must document a complete discussion of the process outlined above, including full details of transactions executed. Transaction costs must bear evidence that it is a realistic figure. Good structure, presentation and concise writing skills are likewise important. Your report length must have a minimum word count of 2,500 words (size 12 font, 1.5 spacing), including all discussion, graphs, tables and references.

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