讲解 BAFI1026 Derivatives and Risk Management Assessment 2 – Task 2 – Individual Trading Session #2讲解

Session Name	Week	Weekday	Date	Time	Instructor	Location
WRK01/06	5	Monday	6 May 2024	9:30-12:30	Giang Hoang	080.04.012 & 080.04.014
WRK01/07	5	Monday	6 May 2024	12:30-15:30	Giang Hoang	080.04.012 & 080.04.014
WRK01/02	5	Tuesday	7 May 2024	9:30-12:30	Ha Truong	080.04.012 & 080.04.014
WRK01/04	5	Tuesday	7 May 2024	12:30-15:30	Jennifer Huang	080.04.012 & 080.04.014
WRK01/03	5	Thursday	9 May 2024	14:30-17:30	John Guo	080.04.012 & 080.04.014

● Attend your selected dealing session in Week 9. Use the CME Group account created in Week 5.

● Your instructor will use 1.5-2 hours to go through the task, elaborate the basic specs of Equity Index future products, explain the trading rules and demonstrate how to trade. You can start trading after instructor’s demonstration.

● Your trading aims to hedge your risk exposure to the stock market risk as well as generating short-term profit. For student whose student number end with odd number, assume you hold a S&P 500 index fund worth $1,200,000 on the trading session day. For student whose student number end with even number, assume you hold a Nasdaq 100 index fund worth $1,200,000 on the trading session day. You aim to use Equity index future products to hedge your price risk.

● You also have $100,000 USD cash on hand at the beginning of your trading. You must use at minimum 50% of your account balance to hedge your stock price risk. Meanwhile, you are allowed to have up to 50% of your account balance to speculating/arbitraging, and the speculation/arbitrage products are not limited to Equity Index futures (e.g., other future products, you can even use Crypto futures to earn short-term profit, but also mind the potential loss).

● Please reset your game from CME Group simulator before your Task 2. Then you can trade any time after your instructor’s demonstration, till any date before 24 May 2024. You can trade as many times as you want, as long as you can justify your trading philosophy. You can do some trials at the beginning of the trading period to get familiar with the platform. When you decide to officially start to implement your strategy, please do not reset the game before your last trading date.

● You can take both long and short positions in the future contracts. Your orders might be rejected by the system because of margin shortage or market close. When your account balance drops to near zero, you are basically out of the game.

Note: Please remind to leave some time to consolidate your trading record and report. For example, someone wants to stop trading on 21 May 2024 and prepare the excel and report between thereafter, some others want to trade till 24 May2024 and prepare the report and excel in several hours. Both are good, as long as you are confident about the quality of your submission.

● Please use the excel template to record your trading and balance on a daily basis, or whenever you make a trade. It is not necessary to flatten (close out) all your open positions. It is a good practice to keep a record on your daily account balance, profit and loss as well as open positions, to facilitate consolidating your report. Please do note that the template is just a basic version provided by the teaching team, feel free to modify it to satisfy your needs.

● Based on your trading history, profit/loss from your futures account, and the income/cost from your physical asset, you need to form. a report to summarize your trading exercise.

Note: Since the contracts can’t be bought in fraction, a tiny variation from the specified budget is acceptable. You can choose to hold some Cash if you believe the investment opportunity is not good enough, but also need to justify this decision in your report.

Ø CME Institute Trading Simulator

Trading Simulator replicates live futures markets by leveraging real market data. A constant stream of new prices informs your strategies for CME Group’s top products across all 6 asset classes, including Bitcoin and Micro E-mini futures. The Access to the simulator is free, all you need is a CME Group Login account. Please create an account before trading.

Ø Marking Guide

Your report must include the following sections:

1. Trading objectives: (2 marks)

Give an overview of your trading objectives.

2. Summarize your hedging strategy (6 marks)

Provide a summary on how you use Equity Index future products to hedge your stock market price risk. The content should include but not limited to:

· How much percentage do you hedge your portfolio? And why?

· Which future product(s) you use to hedge your risk, outline their basic specs?

· What strategy you employed to hedge (e.g., delivery month, contract price, contract amount, long or short, etc)?

· What is the performance of your hedging by the end of your last trading date? And how the spot price change for your fund holding?

3. Summarize your speculation trading (7 marks)

Provide a summary on how you use future contracts to speculate/arbitrage during your trading period. The content should include but not limited to:

· Do you think the 50% limits allocated on speculation is too high? And why? Do you feel speculation is risky from your trading exercise?

· How the speculation performed and explain your profit/loss?

· How your speculation strategy differs from last time (Trading session 1)?

· How you feel when you experience losses from the speculation?

Total=15 marks

Ø Submission

All submissions must be made electronically on Canvas, accompanied by a cover sheet. The submission must be using 1 or 1.5 spacing and 12-point Times New Roman font. Work that fails to meet these specifications will not be accepted. Students should ensure that the report is free from problems like copying and plagiarism.

The report and excel spreadsheet will be submitted through “Canvas-Assignments-Assessment 2: Individual Trading Session 2 – Report submission”. You can submit multiple times before the due date. The report should be no longer than 1000 words (-/+ 15%), excluding references and appendix. The student can have up to 2-page appendix. Citation and reference should be provided where necessary. The Excel file contains your workings to support the reported analysis.

Students are required to keep back-ups of all submitted work just in case any are lost.

 Note:

● This instruction includes suggestions on items to include in the report, more information for parts you think are important may be included as you feel necessary, keeping in mind the word limit.

● The teaching team is not supposed to comment on your calculation workings or identify where your calculation mistakes. The teaching team will provide guidance to make sure that you are on the right track. However, it is still your responsibility to investigate your work and identify the errors.

Ø Additional Resources:

1. CME Group:

https://www.cmegroup.com/

2. A proxy for risk-free rate such as 3-month treasury bill can be found here: https://fred.stlouisfed.org/series/TB3MS

3. S&P 500 index historical performance

https://au.finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC

4. Nasdaq 100 index historical performance

https://au.finance.yahoo.com/quote/%5ENDX/history?p=%5ENDX

5. If you need more resources, try Google first

Ø Extension and Special Consideration Policy

Unless extension is granted, severe penalties apply for late submission. For late submission, the mark awarded will be reduced by 10% for each day (2 points) the submission is late. Submissions that are late by 7 days or more will not be marked and zero marks will be awarded.

An application for extension of an assessment task of up to seven calendar days after the original submission due date must be lodged with the course coordinator via email, and where appropriate supporting documents such as a medical certificate in case of illness should be provided. If you're prevented from submitting an assessment on time by circumstances outside your control, you may apply in advance (at least one working day before the assessment deadline) for an extension to the due date of up to seven calendar days.

Apply for extension:

Fill the Microsoft online form by 23:59, 23 May 2024

or

Download and complete an Application for extension of time for submission of assessable work form. (PDF) and submit it to the RMIT School that runs the course.

If you require an extension of greater than seven days, you must apply for special consideration. However, if you have an equitable assessment arrangement which provides for negotiation of submission dates with relevant academic/teaching staff, extensions of more than seven days may be considered.

Marking Rubric (15 marks)
	80%-100%	60%-80%	40%-60%	20%-40%	0%-20%
Trading objective (2 marks)	Trading objectives are clearly identified and summarized without errors.   Issue/problem to be considered critically is stated clearly and described comprehensively, delivering all relevant information necessary for full understanding	Majority of the trading objectives are clearly identified and summarized without errors.   Issue/problem to be considered critically is stated clearly and described, delivering some relevant information necessary for full understanding	Part of the trading objectives are clearly identified and summarized with some errors.   Issue/problem to be considered critically is stated clearly and described, delivering some relevant information necessary for full understanding	Trading objectives are not clearly identified and summarized with some errors.   Issue/problem to be considered critically is stated and described, delivering some relevant information necessary for full understanding	Do not provide discussion on trading objectives
Trading strategy (3 marks) (AoL 3b Contestable perspectives)	Transactions are clearly and well planned to achieve the objectives, well considering the complexities of the economy. Well-justified assumptions are provided   Explain what products were sold or bought, demonstrating the excellent understanding of how future works   Clearly identify the differences between hedging and speculating and provide convincing evidence	Transactions are clearly planned to achieve the objectives, considering the complexities of the economy. Justified assumptions are provided   Explain what products were sold or bought, demonstrating the good understanding of how future works   Clearly identify the differences between hedging and speculating and provide convincing evidence	Transactions are planned to achieve the objectives, some consideration on the complexities of the economy. Assumptions are provided but not well supported   Explain what products were sold or bought, demonstrating an understanding of how future works   Clearly identify the differences between hedging and speculating and provide some evidence	Transactions are planned to achieve the objectives, no consideration on the complexities of the economy. Limited assumptions are provided and not well supported   Explain what products were sold or bought, but lack of understanding of how future works   Clearly identify the differences between hedging and speculating but do not provide convincing evidence	Transactions are not planned to achieve the objectives, no consideration on the complexities of the economy. No assumptions are provided and not supported   Do not explain what products were sold or bought, lack of understanding of how future works   Do not identify the differences between hedging and speculating and do not provide convincing evidence
All transactions/deals are clearly recorded, reported and explained (4 marks) (AoL 5a Fluency and innovation application, 5b Digitally adept)	Demonstrate proficiency in using the trading platform, understand how margin works   Transaction and position records are well and clearly presented in excel without errors     All transactions are clearly explained	Demonstrate ability in using the trading platform, understand how margin works   Transaction and position records are clearly presented in excel without errors   Majority of transactions are clearly explained	Demonstrate ability in using the trading platform, understand how margin works   Transaction and position records are presented in excel but hard to understand or with errors   Part of transactions are clearly explained	Demonstrate ability in using the trading platform, show limited understanding on how margin works   Not all of the transaction and position records are presented in excel but hard to understand or with errors   Majority of transactions are not clearly explained	Do not show ability in using the trading platform, no understanding on how margin works   Transaction and position records are not presented in excel or full of errors   Transactions are not clearly explained or not matched with the report
Performance is clearly analyzed (5 marks) (AoL 3a Analysis and Problem Solving)	Profit and loss are excellently clearly reported and concluded for both hedging and speculating   Excellent analysis is provided to explain the performance, linking to the real-word markets   Key learnings are reflected and go beyond the knowledge from class	Profit and loss are clearly reported and concluded for both hedging and speculating   Good analysis is provided to explain the performance, linking to the real-word markets   Key learnings are reflected	Majority of the profit and loss are clearly reported and concluded for both hedging and speculating   Enough analysis is provided to explain the performance, but limited link to the real-word markets   Key learnings are reflected	Profit and loss are reported and concluded, but with errors.   Insufficient analysis is provided to explain the performance, failing to link to the real-word markets   Key learnings are not fully reflected	Profit and loss are not reported and concluded, with errors.   Limited analysis is provided to explain the performance, failing to link to the real-word markets   Key learnings are not fully reflected
Format and Information source (1 mark) (AoL 4c Written Expression)	The report is well organized and clearly written.  The underlying logic is clearly articulated and easy to follow.  Words are chosen that precisely express the intended meaning and support reader comprehension.  Diagrams or analyses enhance and clarify the presentation of ideas. Sentences are grammatical and free from spelling errors. The report follows designated guidelines. Citations and references are used appropriately. The report is the appropriate length as described for the assignment.	The report is organized and clearly written for the most part.  In some areas, the logic or flow of ideas is difficult to follow. Words are well chosen with some minor exceptions.  Diagrams are consistent with the text. Sentences are mostly grammatical, and only a few spelling errors are present, but they do not hinder the reader. The report follows designated guidelines. Citations and references are used appropriately. The report is the appropriate length as described for the assignment.	Meaning is generally made clear through mostly correct and appropriate formal academic style, grammar, vocabulary, punctuation and spelling.    Paragraphs generally have topic sentences and are adequately developed, coherent and logical	Meaning is generally made clear through adequate and appropriate formal academic style, grammar, vocabulary, punctuation and spelling; some lapses causing lack of clarity.    Some but not all paragraphs have topic sentences and are adequately developed, coherent and logical	Meaning is impeded through frequent use of informal language and errors in grammar, vocabulary, punctuation and spelling.    Paragraphs lack topic sentences and are inadequately developed with poor coherence of ideas and irrelevant information