Instructions for the Project (Before Mid Term)

Collect the data (choose your own stock or Index). Data is the available on the NSE web site.
Ex: Say your stock is RELIANCE
1. Collect the CALL option Data for RELIANCE for the Year 20XX
2. Collect the PUT option Data for RELIANCE for the Year 20XX.
3. Collect the RELIANCE stock futures data for the year 20XX.
4. Collect the RELIANCE stock price data for the year 20XX.
Important
Please Eyeball the data (Take hard look at the data). Understand all the fields in the data. You
should find three month contracts on each date for futures. The expiry date for each month is the
last Thursday of that month. Liquidity is usually highest for the nearest month and gradually
declines for later months. Similarly observe the options data. They are slightly different from the
futures data.
You need to submit a report in HARD COPY incorporating the following details. (Report should
not exceed TWO page, if necessary you can use both sides (typed in standard format).
Your report should cover at least the following aspects
Futures:
Name of the stock; Period Studied, Total Number of observations:
Observations left after cleaning of data: Make sure you have at least 100 observations in all after
cleaning the data.
Describe the data: not more than 5 lines. Commenting on anomalies, filters applied and liquidity.
Calculate basis: comment on the kind of market.
Calculate theoretical future price based on cost of carry model: Comment on whether Cost of
carry model is applicable to your data and limitations of the model if any. See if you can find any
arbitrage opportunities if cost of carry model is applicable to your data. Are the arbitrage
opportunities big enough to be exploitable?
For options:
Name of the stock:
Period Studied:
Total Number of observations:
Observations left after cleaning of data: Make sure you have at least 50 observations in total after
cleaning the data
Comment on the data: not more than 5 lines.
Calculate the Time and Intrinsic value.
What are your findings?
Important Formulae: Basis = spot price futures price
According to Cost of carry model: Futures Price = S* ert
Where S= Spot price, r is the risk free interest rate (3 month T bill, you can get it from RBI
website) and t is the time to expiry expressed as fraction of one year. e is the base of the
natural logarithms
Intrinsic value (IV) for call option = Stock price call strike price; intrinsic value (IV) for put
option = put strike price stock price; IV cannot be negative. That is IV is always >=0
Time value = Option premium intrinsic value;

Grading: Parameters on which grading is done

Analysis (findings should be supported with facts and figures)
Ability to link up theory with what you find,
Reasons if any for your results to differ from theory