StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Investment Options - Research Paper Example

Comments (0) Cite this document
Summary
To be able to answer this question, we must first determine what the words hedger, speculator and arbitrageur mean. Hedgers are individuals and firms which are able to establish a known price level for something they intend to buy or sell later in the cash market…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.7% of users find it useful
Investment Options
Read TextPreview

Extract of sample "Investment Options"

Download file to see previous pages Individuals or firms who speculate in futures contracts by buying to profit from a price increase or selling to profit from a price decrease are aptly termed as speculators. Suffice it to say that speculators put their money at risk in the hope of profiting from an anticipated price change. Buying futures contracts with the hope of later being able to sell them at a higher price is known as "going long." Conversely, selling futures contracts with the hope of being able to buy back identical and offsetting futures contracts at a lower price is known as "going short."
An arbitrageur is a type of investor, actually a type of speculator, who attempts to profit from price inefficiencies in the market by making simultaneous tradesthat offset each other andcapture risk-free profits.An arbitrageur would, for example, seek out price discrepancies between stocks listed on more than one exchange, buy the undervalued shares on the one exchange while short selling the same number of overvalued shares on the other exchange, thus capturing risk-free profits as the prices on thetwoexchanges converge. Arbitrageurs are typically very experienced investors since arbitrage opportunities are difficult to find and require relativelyfast trading.
The three amigos were certainly not hedgers as they were not concerned about protecting the interest of Getty Oil. They were, in fact, keen on making a quick buck out of buying shares of Getty Oil (which were very cheap) and selling them at a higher price when the takeover battle commences. In this regard, they can be considered as speculators as they are buying the shares in the hope of higher selling prices in the future. However, because the three amigos were taking advantage of the price inefficiency of Getty Oil which was at 30$ instead of having risen to $50 to 60, they are arbitrageurs. They were so keen in capturing risk free profits or at least an investment with very little risk.
2. Describe step-by-step their strategy. What were the major assumptions of their strategy They were relying on what type of investors to move in what way
The strategy of the three amigos is to find a stock price which carried with it minimal or no risks (i.e. stock price would not go down in the future). They were looking for a company that was not closely observed by stock traders and which was very likely to have stock prices going up thereby making them earn profits in a very short period.
The major assumption that the three amigos made was that Getty Oil's stock price was not likely to go down and the conditions were ripe for an increase. They arrived at this by considering that Getty Oil was selling only at a low multiple of its cash flow and had assets that can be easily valued and liquidated. Getty Oil also had assets in the right place and had proven reserves. The political, economic and oil industry's environment also showed that is highly probable that oil players will be at the winning edge in the future. The only reason that Getty Oil stock price hasn't risen yet despite all the positive factors was that the shareholders were segmented which was causing inefficiency in grabbing the opportunity. With an imminent takeover, Getty Oil will soon take advantage of the positive fact ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Investment Options Research Paper Example | Topics and Well Written Essays - 2000 words”, n.d.)
Investment Options Research Paper Example | Topics and Well Written Essays - 2000 words. Retrieved from https://studentshare.org/miscellaneous/1501683-investment-options
(Investment Options Research Paper Example | Topics and Well Written Essays - 2000 Words)
Investment Options Research Paper Example | Topics and Well Written Essays - 2000 Words. https://studentshare.org/miscellaneous/1501683-investment-options.
“Investment Options Research Paper Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/miscellaneous/1501683-investment-options.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Investment Options

Diffrent options

...? The competitive advantage of nations Introduction Globalization has brought revolutionary changes in this world. Business is one segment in which globalization exerted significant changes. Most of the prominent organizations are operating internationally or cross culturally at present because of globalization. Countries are competing each other attracting as much as foreign direct investment. The competitive power of nations is depending on many factors. Michael Porter has formulated a Diamond model to explain the competitive power of nations in international market. In his opinion, firm strategy, structure and rivalry, factor conditions, demand conditions, related and supporting industries are the factors governments should control...
6 Pages(1500 words)Essay

Pregnancy options

...Pregnancy Options A pregnancy is one of the most miraculous and natural events that can happen in anyone's lifetime, but is too often threatened by a lack of information that can lead to a poor decision regarding the options that are available for a pregnancy. When a woman becomes pregnant she may decide to carry the baby to term, get a surgical or medical abortion, or place the baby up for adoption. When a woman discovers that she is pregnant, it is critical that she makes a sound decision as soon as possible. Some options, such as a medical abortion, may be time sensitive or require extensive planning. Making the decision to have an abortion with inadequate or incomplete information can result in an irreversible decision that could...
5 Pages(1250 words)Essay

Investment Clubs Options

...Investment Clubs Options - P4DB of the of the Concerned Professor July 30, 2009 Investment Clubs Options - P4DB Why is it Important to Invest Very few people in this world do not want to get rich. A few odd exceptions may be Franciscan monks or individuals given to addictions. Yet, the problem is that a majority of the people have to be satisfied with a more or less fixed monthly income. Moreover, there are only a few who manage to resist the temptations of gross consumerism and are able to save money. Saving is certainly a good habit. However, it goes without saying that an average middle class person cannot entirely rely...
3 Pages(750 words)Assignment

Corporate Finance - Real Options - Application of options

re begins, an executive has the choice to reschedule additional work, abandon it outright, shut it down and resume latеr, incrеase it, trim it back, or even switch its strategic rationale.
The rеal-options technique has been used in industries like extractors of natural resources, enеrgy firms, and pharmaceuticals corporations, which have a grеatеr scale of uncеrtainty in business investments i.e., as far as the oil-drilling industry is concеrned, uncеrtainties comprise issues such as what the cost of the lеased/purchased land will be. How large the oil resеrves would be? What is the appropriate price for the lеase on the resеrve? Questions similar to these have led to the use of the rеal-options methodology as a systematic an...
4 Pages(1000 words)Essay

Career Options

... Web Developer A web developer is responsible for coding, layout and designing of a website. They are involved with graphical and technical aspects of a website this entails how the site looks and works. The key job is to ensure they update and maintain an existing website. A web developer works between 35 and 50 hours a week from 9am to 5.30pm, Monday to Friday however, others are called for maintenance duties over the weekend. The salary of a web developer ranges from $1500 to $3000 per month (Firtman 12). A web developer must have the following skills; should posses skills in software graphics and programming, be imaginative and creative, able to cope with the changing technology, have good communications and interpersonal... Web...
1 Pages(250 words)Assignment

Financing Options

...Financing Options Introduction United Kingdom is a capital- enriched country. Therefore, the financial system of the economy is very strong and facilitates the institutional and retail investors of the economy with a large number of options for large purchases such as house purchase, lease, bank loan and purchase of luxuries cars etc. However, all such financing options suffer from certain underlying issues and drawbacks that affect the concerns and interests of the investors and the economy as a whole to some extent (D. Bell and C. Alex, “A New Fiscal Settlement for Scotland?”, Scottish Affairs, Vol. 41, No. 3, 2001, pp. 121-140). In this paper, various financial options available in the UK economy for large purchase will be evaluated...
9 Pages(2250 words)Essay

Real Options

... Real Options Table of Contents Content Page Real Options ……………………………………………………………3 Financial Management Theories…………………………………………8 Effects and Responses to real options in management………………….9 Summary and Conclusion………………………………………………...10 References ………………………………………………………………..11 Real Options Real options are definite alternatives to an investment. These options relate to tangible assets such as capital investments. They present situations that could lead to venturing into a new opportunity or closure of an existing path in a business lane. Real options can hook the flexibility of managerial set up as well...
7 Pages(1750 words)Essay

Herniated Disks and the Options for Recovery

...Herniated disks and the options for recovery An inter-vertebral disc is constructed of a strong fibrous material, much the same as the tissue on the breast bone of a chicken and is located between every two bones of the spinal column cushioning the movement of the spine. Pieces of the fibrous tissue push backward into the spinal canal if the disc breaks down occasionally pressing against nerves or the spinal cord which causes pain, numbness, or weakness in the legs or arms. A herniated disc can cause discomfort in many ways. Most usually it inflames a nerve from pressure by the piece of the disc rubbing against it. If the herniated disc is located in the low back area, the pain often seems to be roaming down the leg as the patient...
12 Pages(3000 words)Essay

Property Investment Analysis

The Red Book valuation figures offer useful guidance on valuation, however they contain overlapping material from diverse sources. The Mallinson Report has identified the need for the RICS to publish a single, comprehensive and user friendly source of standards for valuers and establish a single point of coordination in the institution’s delivery of valuation services. The Report also states that the information provided needs to be more specific so that it place more specific further education demands on valuers. Additionally, there must be additional power provided to the Institution to investigate problem cases and take disciplinary action when it becomes necessary, despite the possibility of courts exerting a restricting...
13 Pages(3250 words)Assignment

Free Trade and Foreign Direct Investment in Australia, Britain, China

...China’s demand for iron ore has driven the growth of Rio Tinto. BHP Billiton, Vale and Rio Tinto, control about 70% of the worlds trade in iron ore. Each year they negotiate annual supply contracts with their main customers, and as demand has surged, so has the price. In 2005 the price rose by 72%. Australia benefits the most since it is the worlds biggest exporter of iron ore. The output from Rio Tintos mines in the Pilbara, in north-west Australia, has increased by an average of 15% a year since 1999. Between now and 2013 it plans to triple its output. Demand for goods and services in the Pilbaras state, Western Australia, grew by 11% in 2007. Studies have touted the benefits of foreign direct investment. (China Elections and Governance...
9 Pages(2250 words)Term Paper

A Small Sports Car as an Investment

The purpose of this report is to determine the “best bang for the buck” if a consumer was looking to purchase a small sports car. A car purchase should be treated as an investment, even though we know that spending money on a vehicle with the high gasoline prices and insurance premiums is probably the worst type of investment money can buy. Therefore, the ultimate purpose is to guide this expenditure in reaping the maximum benefits available.
I will be researching on 2006 2-seated vehicles in the price range of $30,000 - $50,000 in today’s market. The idea is to keep it within the price range mentioned above, so more expensive cars such as Benz CLK and lower-end vehicles such as Honda Civics are not included...
12 Pages(3000 words)Research Paper

Investment Appraisal and Management Control

...Investment Appraisal and Management Control Introduction: Businesses have to make large investments every year. Investments are generally made on buildings, office equipments, transport, etc. It is very essential that management make informed decisions on every investment made since these decisions are not easily reversible, and involve large sums of money, are very futuristic, and have long-term consequences (Bott, 2008). All decisions made by the management affect the company’s revenue in one way or another. Hence, it is important that managers are aware of the consequences of every decision they take, be it, buying a computer for a small company or a vehicle for delivery of goods, or manufacturing plant for the company or a company...
14 Pages(3500 words)Report

Implications for Personal Investment

The assumption of perfect rationality can be rebutted by the fact that rationality is not the sole driver of human behaviour. On the contrary, our behaviour is contingent upon emotions such as love, fear, pain, and pleasure etc. Human beings only use their intellectual power to achieve or avoid these emotional outcomes (Pompian 2006). Secondly, the assumption of self-interested is also not deemed to be practical because many sociological studies have shown that people are not always self-interested. Had this been the case, then there would not have been a single philanthropist in the world, even people would have avoided negative behaviour such as suicide and alcoholism. The final assumption of perfect information also does not ho...
6 Pages(1500 words)Coursework

About the Investment Options

... portfolio is obviously the self assessment of the investor. Self assessment includes assessing the risk tolerance, the expected return by the investor and also the time horizon for which the investor is ready to keep his/her money invested. Supposing the investor is moderately risk taker but expecting more than average return and time horizon is 5 years. About the Investment options Mutual Fund Mutual Fund is professionally managed pool of assets. Assets are collected from many investors. It is then invested into equities, bonds, money market instruments and other investment options. Mutual funds are open ended or closely ended investment options. The option to pull back the investment amount anytime is available with the investors...
9 Pages(2250 words)Research Paper

Financial Options Pricing Model to Estimate the Value of the Investment Timing Option

...Corporate Finance Mini case Table of Content Corporate Finance Mini case Table of Content 2 What are some types of real options? 3 What are five possible procedures for analyzing a real option? 6 Investment made in present year 8 Investment made after a year 10 Financial option pricing model to estimate the value of the investment timing option 11 Growth option 11 Reference 13 What are some types of real options? Real option is the method of valuating financial option. In corporate financing, this technique is used as the combination of put option and call option. The real option is not an obligation but a right for under taking business decision. This decision making is related to the option of making some capital investing...
7 Pages(1750 words)Assignment

Expropriation in International Investment Law

...Topic: Expropriation in international investment law Introduction There exists a rule in international law that foreigners’ property cannot be taken for public or otherwise any purpose without providing compensation. Two decades back, academic circles and the courts faced disputes regarding the parameters of compensation and how to assess the expropriated value. There was no unanimous opinion regarding the making and development of customary law between the developed and developing countries. Currently, there are no hardliners as a positive attitude has reached among all nations on foreign investment, expansion of bilateral treaties and additional investment agreements that has necessitated quick, sufficient and timely compensation...
8 Pages(2000 words)Assignment

Security Options

...Security options The Computer Security concentration focuses on basic security matters that occur in the design, study, and execution of distributed systems.  This concentration offers in-detail coverage of the hypothesis and relevance of identity, authentication, access control, auditing, appraisal and avoidance of software vulnerabilities, and cryptography, in the perspective of modern enterprise-scale and web-based systems. Setting up a corporate security policy is one of the vital steps in establishing a strong and secured organizational context. Even though the guidelines that require to be taken may be strenuous, they are essential to the progress and security of the whole institution. There are various motives to establish written...
8 Pages(2000 words)Assignment

Investment Strategy and Portfolio Management for Morris

In the modern world, there are a number of avenues that promotes itself as an investment avenue and promises to generate varying returns for investors. Means of investment have grown larger to include new avenues like gold, real estate, commercial papers, commercial deposits, mutual funds, etc. The advantage of investing in a pooled investment vehicle is the size of investment. A pooled fund has a larger corpus than an individual investment and hence can utilize a broader opportunity of investment. Any investment fund needs to have its objective, based on which it decides the avenues of investing. Another important determinant of the fund is the risk appetite of the investors. A fund must have a pre-decided risk-taking ability so...
7 Pages(1750 words)Case Study

Investment by Using On-line Banking Services

...Investment by using On-line Banking Services: The growth of the Internet in the last twenty years has spurred the growth of on-line financial services as well. These days on-line banking and e-commerce have become ubiquitous, as financial transactions are carried out at users convenient place and time. An offshoot of this broader phenomenon is on-line investment services offered by various banks. This means that the erstwhile specialized activity of stock-trading and stock-investing have now been made accessible to common people as well. There are both advantages and disadvantages in using on-line investment services. Foremost of the advantages are the convenience and ease of use associated with investment websites. A number...
6 Pages(1500 words)Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Research Paper on topic Investment Options for FREE!

Contact Us