BFC3340 - Trading Assignment
Due Date: 9:30 am, Monday the 28th of April, 2025
1. Overview
This individual assignment involves trading options on StockTrak, a virtual trading platform simulating real-time trades. The goal is to provide practical exposure to option trading and to test your understanding of option pricing dynamics and Greeks.
2. Requirements
• Capital: Start with $1,000,000.
• Trade: Execute one round-trip option trade (opening and closing trades) within 5 calendar
days. Examples include buying a bull spread and selling it 3 days later, or shorting a straddle and closing it 5 days later.
• Journal: Document your trade in a MATLAB live script. A template is provided.
• Registration: Join the trading challenge on StockTrak (BFC3340_2025_S1) by the end of the relevant tutorial. No deadline for registration but the later you register, the less time you have for trading, and learning!
3. Trade Journal Content
• Trade Description: Describe the option strategy, stock, trade horizon, and your market view.
• Pre-Trade Calculations: Include Greeks, implied volatility (IV), and historical volatility (HV).
• Pre-Trade Analysis: Briefly comment on Greeks and compare IV to HV.
• Opening Trade: Document the executed trade (option and contemporaneous stock prices, date) and update Greeks and IV.
• Exit Trade: Document the closing trade (option and stock prices, date).
• Post-Trade Calculations: Calculate the profit or loss (P&L), decomposing it into delta, gamma, theta, and vega effects.
• Post-Trade Analysis: Reflect on the trade outcome in 3-5 sentences.
4. Submission Requirements
• Files: Submit your trade journal in a MATLAB live script (.mlx) and all relevant data used in your pre-trade calculations in a .mat file.
• Screenshots: Include screenshots of your Transaction History.
5. Marking Criteria
• Total Marks: 20 (20% of overall assessment)
• Criteria: Marks are based on the completeness and quality of the trade journal, not on the financial performance of the trade.
o 16-20 Marks: Complete journal with accurate calculations, strong understanding of Greeks, and thorough P&L evaluation.
o 14-15 Marks: Mostly complete with correct calculations and good analysis.
o 12-13 Marks: Mostly complete but lacking in analysis or trade support.
o 10-11 Marks: Partial completion with some correct calculations and basic analysis.
o <10 Marks: Incomplete or incorrect journal with weak analysis.
• Late Submission: 1 mark deducted per day without consent. Penalties apply for failure to register on time.
6. Registration
Register for a StockTrak account and join the trading session by the end of the relevant tutorial. Use your university email and ensure your username matches your name on Moodle.
How to join
1. Go to this linkhttps://www.stocktrak.com/members/register?sessionid=330857
2. Complete the form. using your name as it appears on Moodle, and university email. For login
information, you can choose your username and password, but be sure to use Monash student email for field “Email Address”.
7. Learning Resources
The following videos should help to navigate StockTrak and making trades on the platform.
o Dashboard: Edit profile
o StockTrak Student User Guide
o Manage Portfolio
o Research Tools
o Symbol Lookup
o Trading Stocks/ETFs
o Trading Options
o Trading Option Spreads
o Order typesvideos(Limit Buy,Limit Sell,Stop,Trailing Stop)
There are also the following 2 more detailed courses
o How to Make a Trade
o Trading Options
Tutorial 5: Provides additional guidance and a trade walkthrough.
8. Trade Selection
Focus on either directional trading (e.g., bull/bear spreads) or volatility trading (e.g., straddles, strangles). Avoid risky naked option positions. Conduct your own research to identify and justify your trade.
9. Research and Data Sources
• StockTrak: Historical stock prices, fundamental information, option chains with Greeks.
• Yahoo Finance: Intraday data, historical prices.
• Barchart.com: Historical volatility and option data.
10. StockTrak Support
For technical issues, use the Live Chat on the platform.
11. FAQs
Do I need to match the time stamp of the option price and the spot price?
Yes. The option price at a given time should correspond to the underlying asset's price at that same time. For accurate Greek calculations, use the spot price from the time of the option trade. For example, if you use a TSLA option price from 3:56 pm on Thursday Eastern Time, find the TSLA stock price at that same time. Yahoo! Finance provides intraday prices, but only for the most recent day. Therefore, check the spot price immediately after executing your trade.
Can I make more than one roundtrip trade?
Yes, you can make multiple trades. Enjoy exploring the platform, but choose only one trade to document in your trade journal.
Is there a position limit?
Yes, each position is limited to 5% of your initial capital. This is to protect your portfolio from significant losses on a single trade.
How many contracts should I trade?
While there’s no strict limit beyond the 5% position cap, it’s advisable to size your trades so that the maximum potential loss doesn’t exceed 2% of your portfolio.
Can I use the implied volatility and/or Greek values supplied by StockTrak or any third party? No, the purpose of this assignment is to develop your own calculations. You must compute the implied volatility and Greeks yourself, and include these calculations in your trade journal.