Type: Individual
Length: 30 minutes
Level: Beginner

Instructions: 

Your assignment is to create a short position using options. To do this, first choose a stock that you think will perform poorly in the next week. To capitalize on this view, you will be buying puts. After you’ve decided which stock to ‘bet’ on, go to the options screener to find puts linked to the stock you’ve chosen. You can use the Underlying filter to help you. After that, choose the contract with the strike price that is closest to the current price of the underlying stock and the expiration date as close to a week from today. Keep in mind that each options contract covers 100 shares.

Monitor the performance of the underlying stock throughout the week. Think about when you want to exercise the option and when you want to let it expire. 

After you’ve exercised the option or it has expired, write a brief reflection about the exercise. Make sure to answer the following questions: What were the advantages and disadvantages of buying a call or a put rather than buying a stock or shorting it directly? Did I exercise the option or did it expire? Would it have been better to buy the option at a different strike price? Why or why not? 

Deliverables:  

  1. Portfolio holdings page
  2. Exercise reflection

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