Suppose Your Wealthy Aunt Minnie Has Asked You to Manage

question 82

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 to 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?
Looking at each option,we see:

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Definitions:

Capitalist

An economic system where private individuals own and control property and businesses, operating them for profit.

Competitive Advantage

A condition or circumstance that puts a company in a favorable or superior business position compared to its competitors.

Sustainable Innovation

The creation of new products, processes, or technologies that meet current needs without compromising the ability of future generations to meet their own needs.

Use of Plastic

The utilization of synthetic or semi-synthetic organic compounds that are malleable and can be molded into solid objects for various uses.