Transcript Optimal Investment Strategy

Optimal Investment Strategy
Sponsor: Dr. K.C. Chang
Tony Chen
Ehsan Esmaeilzadeh
Ali Jarvandi
Ning Lin
Ryan O’Neil
Think. Learn. Succeed.
Background
• Continuation of Fall 2009 Project
• Use real historical data on options prices
instead of using Black-Scholes to estimate
• Options – put/call, long/short, strike price,
expiration date.
• Stop loss
• Sponsor: Dr. K.C. Chang
Think. Learn. Succeed.
Problem Statement
The stock market is a growing segment of modern economies. On a
daily basis millions of options are being traded for a value
equivalent to several billions of dollars. However, there is also an
added risk of losing a fortune. Some of the reasons investors do not
maximize their return are either they are uninformed or fail to
prevent catastrophic losses. The purpose of this analysis is to
evaluate investment strategies with the goal of developing a model
that will better reveal the ideal strategy (where, when, and how) to
invest. This project will optimize strategies for trading S&P futures
options only since it is the among largest and most liquid options
market in the world. S&P futures options are reputed to have one of
the highest rate of returns so the factors contribute to it being a
logical option for this project.
Think. Learn. Succeed.
Project Scope
• Time limited to 1997-2009 due to available
data
• Underlying asset is S&P 500 futures
• Only analyze short strangle strategies
• Strike prices ±$100 from asset price at
increments of 10
• Stop loss from 5 to 45 at increments of 5
Think. Learn. Succeed.
Planned Approach
• Literature search
• Model options trading
• Format data including interpolating missing
data
• Simulation using Java
• Analyze outputs and refine simulation
• Interface development
Think. Learn. Succeed.
Expected Results
• Analytical Model – Application to run
simulation and provide results
• Software Application – GUI for user to input
strategies and display equity curves
• Policy Recommendations – Find optimal
strategies to investor
Think. Learn. Succeed.
Work Breakdown Structure (WBS)
Think. Learn. Succeed.
Earned Value Management (EVM)
• Expected cost based
on the requirement
from to the course
syllabus
• Factors in number of
weeks, number of
team members, and
$40 per hour cost of
labor.
• Forecasted budget
came to $32,000
Think. Learn. Succeed.
Project Schedule (GANTT)
Think. Learn. Succeed.