Abstract
Locking the most promising company in a certain industry at an early stage is appealing for all investors, especially when the industry’s capacity and prospect can be confirmed. The article tries to create three different special options to help investors to achieve this goal. Specifically, the construction process is based on outperformance options, Black-Scholes model, and some special valuation methods. According to the calculation, the price and the power of each future options are demonstrated clearly. Investors can choose one of them to satisfy their requirement for investment return and preference for risk. Four factors related to the price of the future options are also assessed based on sensitive analysis, i.e., one can understand the internal structure of the future options clearly. However, the research is based on the hypothesis that only 2 companies exist in the industry and people can determine the future of the industry. Therefore, following research can focus on multi-companies’ industry and add more uncertain elements to make the results and process more general. These results shed light on eliminating the uncertainty of intra-industry competition, locking the industry leader early and increasing the investment return.
Highlights
In finance, derivatives are the instruments whose price depends on the value of another asset
The stock option is a derivative whose price depends on the underlying stock price
Options are most widely traded on the Chicago Board of Options Exchange (CBOE) [2]
Summary
Derivatives are the instruments whose price depends on the value of another asset. The real options’ price can be obtained by discounting the price to the current period with risk-free rate (0.13%) and time maturity (1 year) According to this formula, one notices that someone who buy it have the power to choose the best performing stocks to delivery or give up to buy any stock. With the help of the excel, the MAX () formula can be applied to get the return of each situation, doing the same thing mentioned before to get the options’ price On this basis, one can obtain the information that someone who buy it have the same power of the people who buy Call-O Options except that they cannot choose to give up delivery. With regard to the correlation, spot price and strike price, similar functions are used
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