Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

BFC3340 – Demonstration - Trading Assignment

Due Date: 11:55 pm, Monday 15 September, 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 research led option trading strategies, option pricing dynamics and option Greeks.

2. Requirements

 Capital: Start with $1,000,000.

 Trade: Execute one round-trip option trade with at least 3 calendar days between the opening trade and the closing trade. Examples include buying a bull spread and selling it 3 days later, or shorting a straddle and closing it 5 days later.

 Journal: Fully document your trade in a MATLAB live script, using the supplied Trade Journal template.

 Registration: Join the trading challenge on StockTrak (BFC3340_2025_S2) 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 Template

The template, in .mlx format, is to be used to document your trade. It contains the following:

 Trade Description: Describe the option strategy, stock, trade horizon, and your view. State the pattern the trade seeks to exploit, with reference to the asset pricing literature.

 Trade Justification: Provide suitable computation and/or visualisation to support your view.

 Trade Execution: Provide details of your entry and exit trades executed in StockTrak (eg option prices, contemporaneous spot price, strike prices, maturities, quantity)

 Trade Analytics: Calculate the profit or loss (P&L), compute Greeks, use Greeks to decompose P&L into delta, gamma, theta, and vega effects.

 Post-Trade Analysis: Reflect on the trade outcome in 3-5 sentences.

The template also specifies the Use of AI policy on the assessment and requires you to complete a Use of AI declaration.

4. Trade Justification

 Your trade should bet on either the direction of the underlying stock or the direction of volatility. The bet should be justified by referencing a pattern or anomaly that is documented in the finance literature.

 Suitable computation and/or visualisation are required to support your justification.

 Tutorial 5 elaborates on this aspect and provides examples of anomalies that you can use to motivate your trade.

5. Submission Requirements

Submission consists of:

1. Your completed Trade Journal (the supplied .mlx file), plus

2. A .mat file containing all relevant data used in your computations.

The marker should be able to run the Trade Journal without any modification. Trade evidence is a screenshot of your Transaction History in StockTrak to be inserted in the Trade Journal.

6. Marking Criteria

 Total Marks: 20 (20% of overall assessment)

Criteria: Marks are based on the completeness and quality of the trade journal and understanding of relevant research, not on the financial performance of the trade.

16–18 Marks

(i) Strategy clearly articulated, supported by strong analysis with reference to relevant finance literature.

(ii) Accurate Greek and implied volatility (IV) calculations alongside correct P&L decompositions, with thorough and insightful evaluation of results.

(iii) Roundtrip trade fully executed, with all trade evidence and supporting data supplied in a clear and organised manner.

14–15 Marks

(i) Strategy mostly well articulated and supported by some analysis with reference to finance literature.

(ii) Mostly accurate Greek and IV calculations, with P&L decompositions showing only minor errors; results evaluated with reasonable depth.

(iii) Roundtrip trade executed with most trade evidence and supporting data supplied, though some minor details may be missing.

12–13 Marks

(i) Strategy partially articulated, with limited support from finance literature or weak justification of trade rationale.

(ii) Some inaccuracies in Greek and IV calculations or P&L decompositions; evaluation of results is incomplete or lacks depth.

(iii) Roundtrip trade attempted but incomplete, or trade evidence and supporting data partially missing.

10–11 Marks

(i) Incomplete journal with poorly articulated strategy and no meaningful reference to finance literature. (ii) Significant errors in Greek and IV calculations or P&L decompositions; results evaluation is superficial or absent.

(iii) Roundtrip trade not completed, and/or multiple pieces of trade evidence and supporting data missing.

<10 Marks

(i) Highly incomplete or incorrect journal with no clear strategy or reference to finance literature.

(ii) Greek and IV calculations absent or entirely incorrect, and P&L decompositions missing or irrelevant.

(iii) No evidence of a roundtrip trade, with minimal or no supporting trade data provided.

Bonus 2 marks: are awarded to submissions that trade on the HV-IV effect, the PEAD effect or another formally documented anomaly that is not listed in Tutorial 5.

Late Submission: 1 mark deducted per day without consent. Penalties apply for failure to register on time.

Unauthorised use of AI: mark deduction and/or investigation of academic misconduct may apply if there is evidence of unauthorised and/or undeclared use of AI.