Stock Portfolio Paper Example
Active &Passive Portfolio – Call/Put Options and Futures This report will document the active traded portfolio held from Friday (July 18th, 2014) until Monday (August 11th, 2014). In this portfolio, the two portfolio managers traded call options and put option for the stocks on the S&P 500, as well as futures contracts in many different asset classes (commodities, currencies, indexes and so on). Trades were made at the end of each week and Monday (August 11, 2014), resulting in four trading days. We decided to divide the portfolio of $500,000 into two of $250,000 dollars, one of those is designed to trade on call/put options and the other will trade only futures. At the beginning of class we created what they felt like was a “winning” passive portfolio. The belief was that with $500,000 invested in our passive portfolio and $500,000 in our active portfolio that we would turn at least a positive profit. With a portfolio beta of 1.004 and a portfolio forward beta of 1.003 we knew that our returns didn’t have as much potential had our beta been higher but believed that we were the superior investors and would prevail. This belief was shattered when trades were closed and we realized we had actually lost money. Our returns week 1 came out to a total increase of 1.635%. Returns week 2, week 3, and week 4 correspond as follows: -1.320%, -.603%, and -.479%. As you can see in Exhibit 1 week 1 was our only profiting week. Facebook generated the largest returns of $4,351.99. This was an 8.70% increase in total portfolio return. As for our lowest passive portfolio performer, Johnson&Johnson returned a -$1,722.34. This was a -3.44% decrease in total portfolio return. Our total value for our passive portfolio turned out to be a -$545.01. This is a .11% loss! Although not much of a loss, a profit is what everyone wants. So we turned to options and futures to see if we can recapture those gains! As seen in Exhibit 2, our first day of trading in options we took long call