Dow Jones Executive Summary
OTIS LE#1 (October 31, 2012)
• Dow Jones industrial average with the largest market cap is Exxon (XOM).
• Dow Jones Industrial average with the smallest market cap is Alcoa Inc. (AA).
• The company with the highest P/E ratio is AT&T (T).
Initially our process of choosing stocks fell into two high-level categories; a look-back and a look forward approach. Many of our stocks (AAPL, ORCL, IBM) were picked after much research into “the numbers.” Members of our group that looked at historical performance focused on growth, return on equity, revenue, earnings per share and overall profitability, among other data. Other stocks (MSFT, CSCO, F) were picked based on the reputation, competitive advantage and/or longevity of the company. For the forward-looking approach, the focus was on what was happening in the near future that might affect stock prices. Some stocks were chosen with an eye on the effects of Hurricane Sandy (GNRC, HD). Others were picked because of planned mergers, or ongoing /upcoming activities in the sector (PHG, GEOY, …show more content…
PHG.) Many choices fell into both categories. A third reason for choosing a stock seemed to be personal preference and an overall positive perception of a company (SAM, WFM, PNRA.)
OTIS LE#2 (November 2, 2012) For our options, two of us each chose a stock we thought might drop in price.
The first was a market order for a put option on Delta Air Lines (DAL). Three option shares (for a total of 300 shares) were purchased at a clearing price of $.48 per share, a strike price of $10.00 and expiration date of November 17th. The underlying stock price was $9.70 on the date of purchase. The second option attempt was a put on 10 shares (1,000 underlying shares) of Bank of America at a clearing price on $7.00 per share, a strike price of $18.00 and an expiration date of November 17th. It was a market option that was not executed, probably because the strike price was too high. Another attempt on a put option was made the next day, for 20 shares of Wells Fargo & Co New, which was successfully executed. The clearing price as $.01 per share, the strike price was $30.00, and the expiration date November 9th. The underlying price was
$33.74.
We sold short two stocks, one of which was the same company as one of our put options. A market order for a short sale of 500 shares of Delta Air Lines was executed at $9.7200 per share. The second short sale was for Goldman Sachs Group. 10 shares were sold short at a price of $121.1900. Delta Air Lines was chosen as a stock that could potentially lose money because of the overall struggles of the airline industry, the effect of the bad weather, and the effects of the political situations in oil producing countries. Goldman Sachs Group was chosen for the other short sale because of continued weak corporate activity and the overall precarious international financial atmosphere. A lack of investor interest is already threatening profits, and a European country's default could set the stage for a partial or complete run on deposits.
• Dow Jones industrial average with the largest market cap is Exxon (XOM).
• Dow Jones Industrial average with the smallest market cap is Alcoa Inc. (AA).
• The company with the highest P/E ratio is AT&T (T).
Initially our process of choosing stocks fell into two high-level categories; a look-back and a look forward approach. Many of our stocks (AAPL, ORCL, IBM) were picked after much research into “the numbers.” Members of our group that looked at historical performance focused on growth, return on equity, revenue, earnings per share and overall profitability, among other data. Other stocks (MSFT, CSCO, F) were picked based on the reputation, competitive advantage and/or longevity of the company. For the forward-looking approach, the focus was on what was happening in the near future that might affect stock prices. Some stocks were chosen with an eye on the effects of Hurricane Sandy (GNRC, HD). Others were picked because of planned mergers, or ongoing /upcoming activities in the sector (PHG, GEOY, …show more content…
PHG.) Many choices fell into both categories. A third reason for choosing a stock seemed to be personal preference and an overall positive perception of a company (SAM, WFM, PNRA.)
OTIS LE#2 (November 2, 2012) For our options, two of us each chose a stock we thought might drop in price.
The first was a market order for a put option on Delta Air Lines (DAL). Three option shares (for a total of 300 shares) were purchased at a clearing price of $.48 per share, a strike price of $10.00 and expiration date of November 17th. The underlying stock price was $9.70 on the date of purchase. The second option attempt was a put on 10 shares (1,000 underlying shares) of Bank of America at a clearing price on $7.00 per share, a strike price of $18.00 and an expiration date of November 17th. It was a market option that was not executed, probably because the strike price was too high. Another attempt on a put option was made the next day, for 20 shares of Wells Fargo & Co New, which was successfully executed. The clearing price as $.01 per share, the strike price was $30.00, and the expiration date November 9th. The underlying price was
$33.74.
We sold short two stocks, one of which was the same company as one of our put options. A market order for a short sale of 500 shares of Delta Air Lines was executed at $9.7200 per share. The second short sale was for Goldman Sachs Group. 10 shares were sold short at a price of $121.1900. Delta Air Lines was chosen as a stock that could potentially lose money because of the overall struggles of the airline industry, the effect of the bad weather, and the effects of the political situations in oil producing countries. Goldman Sachs Group was chosen for the other short sale because of continued weak corporate activity and the overall precarious international financial atmosphere. A lack of investor interest is already threatening profits, and a European country's default could set the stage for a partial or complete run on deposits.