FINANCE DERIVATIVES TASK
Budget: $30 – $250 AUD
Individual stocks options trading and hedging strategies
This part of the project includes an analysis of the correlations (if any) between options trading
and the historical prices of individual stocks and suggests hedging trading strategies using
options under different scenarios.
Question 1: Based on the provided data, identify the top 5 most traded stocks in the Australian
equity-link options market in 2018, 2020, and 2022, regarding the number of contracts and
volume. Comment on the change(s) if any
Based on the results from Question 1, analyse the historical prices (monthly or
daily) of these stocks using data from Refinitiv Eikon. Explain the trends and main drivers of
the price movements. Are there any correlations between options trading and the historical
prices of these stocks? Explain your answer
Assume that you an investor and considering BHP Group Ltd (Ticker: ASX: BHP).
Conduct an analysis, draw the profit graphs, and make suggestions about hedging the stock
price exposure using options under two scenarios: (1) without stock and (2) with stock. Discuss
and explain the optimal options trading strategy when:
a. Stock price will not change much over the short term.
b. Stock price will go down in the future.
c. Stock price will increase.
d. Stock price will decrease.
e. Stock price will deviate away from current price.
f. Stock price will deviate away from strike prices.
The following information is provided:
BHP Call option BHP Put option
Strike price Min: $36.1 – Max: $44.5 Min: $36.1 – Max: $44.5
Premium cost $1.15 $0.92
• Current stock price: $44.97
• Maximum positions: 4
• Contract size: 1
• Minimum and maximum stock price exposure is identified by historical price
movement from 2018 to June 2023
This part of the project includes an analysis of the correlations (if any) between options trading
and the historical prices of individual stocks and suggests hedging trading strategies using
options under different scenarios.
Question 1: Based on the provided data, identify the top 5 most traded stocks in the Australian
equity-link options market in 2018, 2020, and 2022, regarding the number of contracts and
volume. Comment on the change(s) if any
Based on the results from Question 1, analyse the historical prices (monthly or
daily) of these stocks using data from Refinitiv Eikon. Explain the trends and main drivers of
the price movements. Are there any correlations between options trading and the historical
prices of these stocks? Explain your answer
Assume that you an investor and considering BHP Group Ltd (Ticker: ASX: BHP).
Conduct an analysis, draw the profit graphs, and make suggestions about hedging the stock
price exposure using options under two scenarios: (1) without stock and (2) with stock. Discuss
and explain the optimal options trading strategy when:
a. Stock price will not change much over the short term.
b. Stock price will go down in the future.
c. Stock price will increase.
d. Stock price will decrease.
e. Stock price will deviate away from current price.
f. Stock price will deviate away from strike prices.
The following information is provided:
BHP Call option BHP Put option
Strike price Min: $36.1 – Max: $44.5 Min: $36.1 – Max: $44.5
Premium cost $1.15 $0.92
• Current stock price: $44.97
• Maximum positions: 4
• Contract size: 1
• Minimum and maximum stock price exposure is identified by historical price
movement from 2018 to June 2023