The short case looks at the plight of a portfolio manager during periods when the overall markets are docile, resulting in very little movement in the base prices and consequently in the overall portfolio value. Along with this situation, the possibility of just having one well-analyzed security as the only component of the portfolio is also being examined. Specifically, the protagonist looks at several options-based strategies for profiting albeit marginally even during times when the market movements are minimal.
The case seeks to expose students to the choice of the ideal options strategy where the risk is minimum, and returns are likely to be steady. In other words, the maximum loss and maximum gain potential are both minimum. Specific case pedagogical objectives are:
• Understanding challenges of portfolio management in docile times
• Distinguishing between active and passive portfolio management strategies
• Understanding the implications of a single-security portfolio
• Practical application of the use of derivative instruments for enhance portfolio values without great risk