Description

Questions:

Question 1 – Mini-Equity Project (4-5 pages, including tables, charts)

Assume, as of April 2020, that you are employed as an equity analyst performing ‘sell-side’ research on US equities. In the context of the recent sharp reductions in stock markets, high volatility, and ongoing uncertainty over the COVID19 pandemic, you have been asked to perform a short, focused research report on one company on the S&P500 index https://www.slickcharts.com/sp500

NB: You cannot choose the same company as you used for the 40% project. However, it is reasonable to select a stock in the same sector (but you are not required to do so),

Required (4 – 5 pages)

1.      Investment Summary (as per main project)

2.      Business overview – key facts, segments, historical performance

3.      Recent events relevant to industry – this will vary a lot by sector (e.g. pharma vs. airlines, supermarkets vs. tourism)

4.      Fundamental and technical valuations – evaluate changes in key metrics, use 1 or 2 technical indicators

5.      Key risks and opportunities as of April 2020

Question 2 – Technical Analysis & EMH

(a) Select any one of the 30 companies that comprise the Dow Jones Industrial Average. The Dow 30 are here https://money.cnn.com/data/dow30/

Suppose that you wish to use technical analysis to analyse the stock price over the past month and 1-year horizons.

·    Explain briefly any two (2) differences between how investors apply technical analysis compared to fundamental analysis.                                                                                                                                                  

·    Using your chosen company, select any three (3) indicators from the following list

https://www.tradingtechnologies.com/xtrader-help/x-study/technical-indicator-definitions/list-of-technical-indicators/ or

https://www.visualcapitalist.com/12-types-technical-indicators-stocks/

Explain the underlying logic behind each indicator.

Using any standard website, download the relevant technical charts for both the past month and also 1-year period.

Critically evaluate how you would interpret each technical indicator in terms of its ability to add value to investors or send clear trading signals in each of the relevant time periods.                                                                             

(b) “The popularity of technical analysis is a clear rejection of the Efficient Markets Hypothesis”.

Using examples, discuss whether you agree with this statement.  (500-600 words)                                                                                                                                                                    

And one from those two questions:

Question 3 – Options

(a) A trader buys a call option with a strike price of €35 and a put option with a strike price of €30. Both options have the same maturity. The call costs €2 and the put costs €3.

Draw a diagram showing the variation of the trader’s profit with the asset price.

What trading strategy is being described here?                                                                    

(b) Bank of America shares were trading at $20.26 on April 3rd.

Suppose you wish to call options https://finance.yahoo.com/quote/BAC/options/ with a May 15th expiry to trade two different strategies.

Choose your own call options and note the price of each option on the day you do this question. Also note the share price on that date.

Explain how call options be used to create (i) a bull spread and (ii) a bear spread? In each case, clearly explain the rationale for the spread and show how each one is constructed.

Construct a table and diagram that shows the profit matrix for the both spreads.                              This is a useful resource http://www.cboe.com/strategies