The subject of this case is the usage of options to protect existing stock positions against short-term losses from adverse market moves. So, you are a trader tasked with taking two stock positions and using options to protect them from losses beyond certain level: 1. One, specified in terms of dollar loss per share. 2. The other, in terms of volatility. These are two independent trades, intended to protect a short and a long stock positions. The details of the trades are given below. Mandatory elements:
a) Execute the required trades any time of your choosing on Monday or Tuesday (during the regular trading session, of course).
b) Do not trade anything unrelated to the case on Monday and Tuesday.
Hedge #1:
c) In this part, you have to buy MKT 100 shares of Apple Inc. (AAPL).
d) Hedge this stock position against a $10 loss per share over the next week after the trade by taking an option position of appropriate type and size.
