| Category | Assignment | Subject | Finance |
|---|---|---|---|
| University | University of Lincoln (UOL) | Module Title | FINC 604 Finance, Futures and Options |
1. Strategy Creation:
Assume you already hold shares in the three (03) firms you have been assigned. You are required to design a suitable stock option trading strategy for each of the three firms to manage the price risk, based on all the trading strategies covered in the course, including those from the self-study section. (ONE strategy for one firm)
Use the relevant information on Investopedia Simulator for your option strategies (assuming all options are European).
Notes: Ignore all trading fees and time zone differences when creating and managing your strategies. No trades are required in the simulator. Use the minimum number of contracts necessary to implement your chosen strategy.
2. Observation Period
Monitor the performance of all three option trading strategies for at least four (04) consecutive weeks. Include supporting materials such as screenshots at the following stages:
(1) when the strategy is implemented, (2) two weeks after implementation (e.g., the current underlying asset prices, etc.), and (3) at the conclusion of the observation period.
3. Performance Analysis
4. Evidence of work done:
Include all referenced screenshots in the Appendix of your final report and a ZIP file (Refer to subsection 5 in B. Submission Guidelines).
a) Firm Information
Provide general information on firms’ business and operations, recent stock performance, and any other information that may affect the firm’s performance and its option markets.
b) Option Strategies
Provide a detailed rationale for each selected strategy, specific strategy settings and all possible outcomes.
c) Strategy Performance
Calculate the hypothetical gain or loss (in dollars terms) after the observation period.
Analyse and discuss how each strategy performed.
1. Exposures:
Assume you have one of the following exposures chosen based on your Lincoln University student ID number:
a) IF the last digit of your student ID is an odd number, your exposure is:
After the harvest season, you will have 30,000 bushels of soybean in Jan 2026. The hedge ratio is 0.5.
b)IF the last digit of your student ID is an even number, your exposure is:
You need to transfer 500 troy ounces of Gold in Jan 2026 to your business partner as part of a payment. The hedge ratio is 0.6.
c)IF the last digit of your student ID is zero, your exposure is:
You need 25,000 MMBtu. of natural gas in Jan 2026 for your manufacturing operations. The hedge ratio is 0.8.
2. Hedging Strategy Creation:
You are required to apply the knowledge you have acquired in FINC604 to design a hedging strategy for your exposure using futures contracts available on Yahoo Finance.
Note: You should ignore all trading fees and time zone differences when creating and managing your strategies.
3. Observation Period:
You must monitor your hedging strategy for at least five (05) consecutive trading days
(excluding weekends). Include supporting materials such as screenshots at the following stages: (1) when the strategy is implemented, (2) the prices of the relevant strategy components during the following 04 trading days or beyond.
4. Performance Analysis:
After the observation period, you are required to analyse and discuss the performance of your hedging strategy usage.
5. Evidence of work done:
While completing this project, take relevant screenshots from Yahoo Finance and other related sources as evidence of your trades and strategy implementation.
Refer to these screenshots in your analysis and discussion as needed. Refer to the Appendix of this guideline document for screenshot samples.
Include all referenced screenshots in the Appendix of your final report and a ZIP file (Refer to subsection 5 in B. Submission Guidelines).
1. Hedging Strategy
2. Strategy Performance
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B. SUBMISSION GUIDELINES
Report Length:
The report is a maximum of 15 (fifteen) pages, excluding tables, references and appendices.
Use double spacing, standard 1-inch margins, and a 12-point font such as Times New Roman.
The report must be in MS Word format
Handwritten reports will NOT be accepted or marked.
A cover page is not required, but your name and student ID must be clearly included in the submission.
Referencing:
All references must be properly cited within the body of the assignment and included in a reference list formatted using APA style (7th edition).
Tables and Figures/Screenshots:
All tables and figures (including graphs and screenshots) must be clearly labelled with captions
(e.g., Table 1: Yahoo Finance Screenshots, Figure 1: Stock Prices, etc.).
Figures and screenshots must be readable. All text and lines must be clear when viewing your document zoomed to 100%. Some samples of figures/screenshots are in the appendix of this document for your reference. Marks will be deducted for low quality figures/screenshots that relevant information cannot be extracted.
Students must submit the following files to the Project Dropbox on LEARN:
01: + File Name: “Final-Report-StudentID.docx”
02: + File Name: “Screenshots-StudentID.zip”,
You will compress all original screenshots (No Amendment) (in PNG or JPEG) that are used in your final project report in a single ZIP file and submit it to the Dropbox.
ASSESSMENT POLICY REGARDING THE USE OF ARTIFICIAL INTELLIGENCE
(AI) TOOLS
The use of Artificial Intelligence (AI) tools, such as ChatGPT, co-pilot and language translation software, to complete this assessment is prohibited. You may not use AI writing tools like
QuillBot to paraphrase or write your report. However, you may use applications like Microsoft Word or Grammarly to check your grammar and spelling. Ultimately, your report must be written by you and presented in your own words.
Assessment answers will be analysed for evidence of the use of AI and penalties may be administered.
Please note Grammarly and many other similar tools include AI features which you must not use to complete this assessment. Turn-it-in can detect the use of these features. If you are unsure about whether a tool is permitted, please contact me before using it.
Appendix (Attached).
Marking Rubric (Attached)
| Criteria | ||||
| Firm Information | ||||
| A1 | Missing – 0 | Poor – 1 | Good – 3 | Excellent – 5 |
| Firm
Information (5 marks) |
No firm details provided. | Minimal or outdated firm information; lacks relevance or accuracy. | Adequate background, recent data included; may lack depth or analysis of implications. | Comprehensive, up-to-date information; clear link between firm’s status and impact on strategy. |
| Option Strategies | ||||
| A2 | Missing – 0 | Poor – 3 | Good – 8 | Excellent – 12 |
| Strategy
Rationale Explanation (12 marks) |
No explanation or justification provided. | Basic or unclear rationale; lacks depth or connection to market conditions and firm context. | Clear explanation with relevant logic; some consideration of firm/market context. | Thorough and insightful rationale; well-supported by market analysis or theoretical justification. |
| A3 | Missing – 0 | Poor – 3 | Good – 5 | Excellent – 7 |
| Strategy Settings (7 marks) | Strategy parameters/settings not mentioned. | Incomplete or incorrect settings (e.g., strike prices, expiries); limited understanding. | Most settings correctly chosen and justified; minor inaccuracies. | Fully detailed, accurate, and welljustified settings that align with stated objectives in A2. |
| Strategy Performance | ||||
| A4 | Missing – 0 | Poor – 1 | Good – 3 | Excellent – 5 |
| Strategy
Possible Outcomes (5 marks) |
No outcomes mentioned or discussed. | Few outcomes considered; lacks scenarios or scenario range. | Several plausible outcomes discussed with moderate detail. | Wide range of realistic outcomes discussed; includes hypothetical profit/loss range, breakeven points, and market contingencies, etc. |
| A5 | Insufficient – 0 | Poor – 2 | Good – 4 | Excellent – 6 |
| Analysis of
Strategy Performance (6 marks), given |
No analysis provided. No observations recorded, or observations span less than one week; | Very basic or incorrect evaluation (e.g., ignores key metrics like max loss/gain, G/L, etc.). | Adequate performance analysis using relevant metrics; may miss some depth. | In-depth quantitative performance analysis using appropriate metrics (e.g., payoff diagrams, etc.). |
| A3, A4 are correct. | The recorded observation time is less than 2 consecutive weeks. | The recorded observation time is at least 3 consecutive weeks. | The recorded observation time is at least 4 consecutive weeks. | |
| A6 | Insufficient – 0 | Poor – 4 | Good – 10 | Excellent – 15 |
| Discussion on
Strategy Performance (15 marks), given A3, A4 are correct. |
No discussion included. No observations recorded, or observations span less than one week; | Limited or superficial commentary; fails to interpret results or connect back to objectives. The recorded observation time is less than 2 consecutive weeks. | Reasonable discussion; attempts to relate performance to expectations and firm context.
The recorded observation time is at least 3 consecutive weeks. |
Critical and insightful discussion; effectively links performance to strategy rationale, firm data, and potential real-world decisions, etc. The recorded observation time is at least 4 consecutive weeks. |
| A7 | Missing – 0 | Poor – 1 | Good – 3 | Excellent – 5 |
| Critical Thinking (5 marks) | No evidence of critical thinking with no evaluation, counterpoints or independent thought. | Limited evidence of critical thinking, largely describes aspects of the topic. Basic opinions with limited to no evaluation, counterpoints or independent thought. | Demonstrates critical thinking and basic analytical insight. Includes some evaluation, emerging counterarguments, or signs of independent thought. | Shows strong critical thinking and deep analysis. Provides welldeveloped evaluations, considers multiple perspectives, and demonstrates clear independent reasoning. |
| Criteria | ||||
| Hedging Strategy | ||||
| B1 | Missing – 0 | Poor – 2 | Good – 5 | Excellent – 7 |
| Hedging
Strategy Explanation (07 marks) |
No explanation or justification provided. Strategy parameters/settings not mentioned.
No outcomes mentioned or discussed. |
Basic or unclear rationale; lacks depth or connection to market conditions. Incomplete or incorrect settings. | Clear explanation with relevant logic; some consideration of firm/market context.
Most settings correctly chosen and justified; minor inaccuracies. |
Thorough and insightful rationale; well-supported by market analysis or theoretical justification. Fully detailed, accurate, and welljustified settings that align with stated objectives. |
| Few outcomes considered; lacks risk/reward scenarios or scenario range. | Several plausible outcomes discussed with moderate detail. | Wide range of realistic outcomes discussed; includes profit/loss range, and market contingencies. | ||
| Strategy Performance | ||||
| B2 | Insufficient – 0 | Poor – 2 | Good – 5 | Excellent – 7 |
| Analysis of
Hedging Strategy Usage (7 marks), given B1 is correct. |
No analysis provided. No observations recorded, or 01 day. | Very basic or incorrect evaluation (e.g., ignores key metrics like max loss/gain, delta, P/L).
The recorded observation time is less than 03 consecutive days. |
Adequate performance analysis using relevant metrics; may miss some depth.
The recorded observation time is 03-04 consecutive days. |
In-depth quantitative performance analysis using appropriate metrics (e.g., payoff diagrams/tables, etc.). Consistent and timely daily observations recorded (at least 05 consecutive days). |
| B3 | Insufficient – 0 | Poor – 2 | Good – 5 | Excellent – 8 |
| Discussion on
Hedging Strategy Usage (8 marks), given B1 is correct. |
No discussion included. No observations recorded, or 01 day. | Limited or superficial commentary; fails to interpret results or connect back to objectives. The recorded observation time is less than 03 consecutive days. | Reasonable discussion; attempts to relate performance to expectations and exposure context.
The recorded observation time is 03-04 consecutive days. |
Critical and insightful discussion; effectively links performance to hedging strategy rationale, exposure, and potential real-world decisions, etc.
Consistent and timely daily observations recorded (at least 05 consecutive days). |
| B4 | Missing – 0 | Poor – 1 | Good – 2 | Excellent – 3 |
| Critical Thinking (3 marks) | No evidence of critical thinking with no evaluation, counterpoints or independent thought. | Limited evidence of critical thinking, largely describes aspects of the topic. Basic opinions with limited to no evaluation, counterpoints or independent thought. | Demonstrates critical thinking and basic analytical insight. Includes some evaluation, emerging counterarguments, or signs of independent thought. | Shows strong critical thinking and deep analysis. Provides welldeveloped evaluations, considers multiple perspectives, and demonstrates clear independent reasoning. |
| Criteria | Missing – 0 | Poor – 4 | Good – 9 | Excellent – 15 |
| Reflection (15 marks) | No reflection on personal learning experience, insights gained throughout the process of completing the final project | Minimal reflection provided; lacks or has poor quality personal learning experience, insights gained throughout the process of completing the final project | Basic reflection provided with personal learning experience, insights gained throughout the process of completing the final project | Deep, thoughtful reflection provided with personal learning experience, insights gained throughout the process of completing the final project
|
| Criteria | Poor – 1 | Good – 3 | Excellent – 5 |
| Presentation / Formatting (5 marks) | Major inconsistencies in formatting and labelled figures and appendix supporting material or use of APA, etc.
|
Minor inconsistencies in formatting or labelled figures or appendix supporting material or use of APA, etc.
|
Professionally formatted, with figures clearly labelled, appendix contains supporting material and report correctly cited using APA, etc.
|
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