Suppose Your Wealthy Aunt Minnie Has Asked You to Manage

question 334

Essay

Suppose your wealthy Aunt Minnie has asked you to manage her large stock portfolio. You would
like to buy and/or sell options on many of the stocks she owns. Describe the types of options you
would buy or sell, as well as your rationale, given the following circumstances:
A. Aunt Minnie owns 10,000 shares of IBM common stock. You believe it is going to fall in price, but
she won't let you sell it because her late husband told her never to let it go. How do you protect her
from the impending price decline?
B. Your analysis suggests that the common stock of Jet-Electro is poised to increase in value
sharply over the next year. Aunt Minnie doesn't want to buy any of the stock, but does want you to
use options to profit if the price rises. What do you do?
C. Although Aunt Minnie doesn't want you sell any of the stocks she owns, she would like you to
use options to generate a little extra income. How might you do this?

---

Definitions:

United Auto Workers

A labor union in the United States representing workers in the automotive industry.

International Brotherhood

A term that can refer to solidarity among different nations or peoples, or to specific organizations aiming to promote such solidarity.

Right to Work Laws

Laws that prohibit agreements between labor unions and employers that make membership, payment of union dues, or fees a condition of employment, either before or after hiring.

Union Members

Individuals who belong to a labor union, an organization that represents workers' interests in negotiations with employers over wages, benefits, and working conditions.