Assignment - Stocks and Options
For your team's company use Yahoo Finance (https://screener.finance.yahoo.com/bonds.html) and answer the following questions:
Company name: Cadence (CDNS)
1) Find out stock price and stock beta.
2) Download historical stock price for the last 2 years and use it to find stock standard deviation. What is the difference between stock standard deviation and stock beta?
3) Find the company market cap then use it to find out number of common stocks in the company. How does your calculated number of common stocks compare to the number in the 10K SEC Filing?
4) What is the company earning per share? Use this earning per share number to find out company's total earning. How does your calculated earning compare to earnings reported in the 10K SEC filing.
5) Find 4 stock options with expiration date longer than one year as below
a. Put option in the money
b. Call option in the money
c. Put option out of the money
d. Call option out of the money
For each of these four options:
(1) Write down expiration date, strike price and option price,
(2) Use Black-Scholes option model to find option value,
(3) Complete the chart below (option payoff against stock price) for each of the four options:
Why is the option value you calculated using Black-Scholes model is different from the option price?
6) If you want to invest in this stock but you are a risk averse person and want to guarantee that you never lose no more than 20-30% even if the stock crash, design an portfolio of stocks and options that gives you this guarantee. How much does guarantee cost you?
7) If you are interested in buying 1000 stock shares in this company but you don't have enough cash. Design a portfolio of stocks and options that doesn't require a lot of cash but has an upside return as close as possible to buying the 1000 stocks? What is your maximum loss?
8) How do you improve the portfolio you built in question 7 to make money whether stock price goes up or down? What is your maximum loss in this case?