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Greece

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The Keller All-Star Growth Fund was a medium-sized closed-end investment company and is thinking about starting using options .The analysis would be contacted for two companies stocks the AT&T, which produces telephone services and Lotus which produces software. The stock price (So) of both stocks is $55. Lotus has higher option premiums than AT&T since the daily stock price volatility is higher.
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The main advantages of using options are: flexibility, the use of unique strategies, it’s possible to make extraordinary returns, hedging and leverage gain. The main disadvantages are: that income is being taxed, highly complicated, there are no options for all stocks, time decay and high commissions.
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Next, we will see the main investment strategies:

1. Buying the stock (LONG STOCK): is when we buy a stock of AT&T with a Spot Price(So) of $55 in time zero (t=0) with the expectation that the asset will rise in value. Profit is equal to Stock Price minus the Spot Price. If the Stock Price is greater than the Spot Price we will have a profit, and if the Stock Price is less than the Spot Price we will have a loss.

Page 5: 2. Buying a call option (LONG CALL): A call option is a contract in which the buyer has the right ,but not the obligation to buy 100 shares of AT&T at a specified price(Strike Price of $55 within a fixed period of time until its expiration in 4 days, at call premium of (c) $0.5. Profit is equal to Stock Price minus the strike price minus the call premium. In order to use this strategy, the investing firm must be expecting that the Stock Price will increase in the future. By exercising the call option, the company will buy the stock at the strike price and sell it for St in the market.

Page 6: 3. Writing a Call option (SHORT CALL): A call option is a

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