Investing with Bloomberg 3 || Multi-asset Portfolios || Derivatives Analysis
TLDRThe video walks through building a multi-asset portfolio in Bloomberg, comprised of stocks like Procter & Gamble and Google plus an Amazon call option. It demonstrates how to lookup the option in Bloomberg's options monitor, copy its name, and add it to the portfolio with a 30% weight. The video then analyzes the portfolio's performance over time, showing the call option lost significant value and hurt returns as Amazon's stock price fell below the option's strike price.
Takeaways
- π¨βπ» The video demonstrates how to build a multi-asset portfolio with stocks and options in Bloomberg
- π The portfolio consists of two stocks (Procter & Gamble and Google) and a call option on Amazon
- π The process involves looking up the option chain for Amazon to select the specific call option to include
- ποΈ The portfolio uses a historical start date to analyze past returns and performance attribution
- π The portfolio lost 24% for the period, with the Amazon call option being the worst performer
- π The attribution analysis shows the call option lost 91% and contributed -26% to the total return
- π Amazon stock rose 10% in November which benefited the call option
- π The call option lost value in December as Amazon stock price fell below the strike price
- π Call options gain value when the underlying stock price rises above the strike price
- π Call options lose value when the underlying stock price falls below the strike price
Q & A
What types of securities are included in the multi-asset portfolio?
-The multi-asset portfolio consists of two stocks - Procter & Gamble and Google, along with a call option on Amazon stock.
What percentage of the portfolio is allocated to the Amazon call option?
-30% of the portfolio is allocated to the Amazon call option.
What is the expiration date and strike price for the Amazon call option?
-The call option expires on February 15, 2019 and has a strike price of $1,990.
Why is the attribution analysis useful for this portfolio?
-The attribution analysis shows the performance contribution of the different security types (equities vs derivatives), which helps explain the drivers of the overall portfolio return.
How did the Amazon call option perform over the analysis period?
-The Amazon call option lost significant value, with a 91% loss over the quarter-to-date period, negatively contributing 26% to the total portfolio return.
How does the price movement of Amazon stock impact the call option value?
-If the Amazon stock price falls below the call option strike price of $1,990, it is less likely the call option will be exercised, causing it to lose value.
When was Amazon stock last trading near the call option strike price?
-The Amazon stock price was last near the $1,990 strike price at the end of September when the portfolio was created.
Why did the call option lose so much value in December?
-In December, Amazon's stock price dropped 10%, moving further away from the $1,990 strike price, severely impacting the call option value.
Should more call options be added to the portfolio?
-Given the poor performance of the Amazon call option over the analysis period, adding more call options would likely further increase risk rather than improve returns.
What changes could improve the performance of this multi-asset portfolio?
-Reducing or eliminating the call option allocation and shifting to more stable, dividend-paying stocks could potentially improve risk-adjusted returns.
Outlines
π Building a multi-asset portfolio with stocks and options on Bloomberg
This paragraph describes setting up a multi-asset portfolio on the Bloomberg terminal consisting of two stocks (Procter & Gamble and Google) and a call option on Amazon stock. It walks through creating the portfolio, selecting the weights for each asset, and picking a historical start date to analyze performance.
π Adding the Amazon call option to the portfolio
This paragraph explains how to add the Amazon call option to the portfolio by: 1) Looking up Amazon stock 2) Using the ALMON function to see available options 3) Selecting a Feb 2019 call option 4) Copying the call option name and pasting into portfolio with 30% weight.
π Analyzing portfolio performance and the impact of the Amazon call option
This paragraph analyzes the portfolio's volatile performance from Oct-Dec, showing the call option lost significant value and detracted from returns. It looks at Amazon's stock price changes to understand the option's performance, explaining the option loses value when the underlying price goes down.
Mindmap
Keywords
π‘portfolio
π‘call option
π‘underlying
π‘strike price
π‘equity
π‘risk
π‘performance
π‘attribution
π‘timeframe
π‘derivative
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Transcripts
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