Steve Smith holds a diversified share portfolio worth approximately $200,000 that tracks the performance of the ASX 200 Total Return index. Due to a recent market event, Steve is becoming increasingly concerned about market volatility affecting the short-term performance of his portfolio. Steve has generated significant capital gains associated with the growth of his investment over time and is reluctant to liquidate the portfolio, and thus wishes to avoid a large capital gains tax bill from the Australian Taxation Office (ATO) this financial year. To allay Steve’s concerns, his portfolio manager has suggested that he could consider using financial derivatives (e.g., equity options) and alternative asset classes to help protect against downside price risk. Steve is positively disposed to these suggestions. As Steve’s portfolio manager, he has asked you to:

a) Identify and discuss two (2) relevant equity option strategies. 

b) Identify and discuss two (2) alternative asset classes. 

Answer rating: 100% (QA)

A Steve Smith can use two type of equity Option strategies I protective put strateg... View the full answer