The Covid-19 Pandemic has disrupted the performance of many business entities. Depending on the core business activity of a company, the continuity of its business is highly uncertain. This case highlights two companies in Malaysia that falls in this uncertain circumstance. First is the AB-Travel Corporation, which operates a fleet of inbound and outbound tours, hotels, restaurants and entertainment outlets. Second is the Mega-Medic Corporation, which produces surgical rubber gloves, face masks and deals with various medical equipment.

Generally, the market sentiments for listed company shares has been bearish since the Covid-19 pandemic control orders were implemented in Malaysia in March 2020. However, the businesses that involved predominantly in healthcare have achieved uptrend movements in its stock prices while the businesses that involved in tour and entertainment has its stock prices dipped.

AB-Travel Corporation's shares are currently trading at RM3.50 per share while Mega-Medic Corporation shares are trading at RM9.00 per share. AB-Travel Corporation's share prices had recorded a 15% drop in the last 4 weeks and had dropped about 60% since last year. Mega-Medic Corporation's shares has recorded a 20% increase in the last 4 weeks and has appreciated by about 450% since last year.

Assuming that you represent a financial institution that can trade options contracts and you have gathered information on both these firms.Based on the April 2021 European Options trading data on both these firms (which will expire on 30^th April 2021), you are required to strategize the best options trading which can provide profit at lowest possible cost.

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April 2021 Option Prices: AB-Travel Corp. Put Price_ Strike Price Call Price_ (RM) 3.00 3.25 3.50 3.75 4.00 4.25 4.50 (RM) 0.25 0.22 0.18 0.15 0.12 0.10 0.08 (RM) 0.45 0.55 0.65 0.90 1.05 1.12 1.25 April 2021 Option Prices: Mega-Medic Corp. Strike Price Call Price_ Put Price_ (RM) 8.50 8.75 9.00 9.25 9.50 9.75 10.00 (RM) 0.98 0.90 0.75 0.65 0.55 0.50 0.45 (RM) 0.33 0.45 0.55 0.70 0.85 0.90 1.02 April 2021 Option Prices: AB-Travel Corp. Put Price_ Strike Price Call Price_ (RM) 3.00 3.25 3.50 3.75 4.00 4.25 4.50 (RM) 0.25 0.22 0.18 0.15 0.12 0.10 0.08 (RM) 0.45 0.55 0.65 0.90 1.05 1.12 1.25 April 2021 Option Prices: Mega-Medic Corp. Strike Price Call Price_ Put Price_ (RM) 8.50 8.75 9.00 9.25 9.50 9.75 10.00 (RM) 0.98 0.90 0.75 0.65 0.55 0.50 0.45 (RM) 0.33 0.45 0.55 0.70 0.85 0.90 1.02

Answer rating: 100% (QA)

Given the option prices for ABTravel Corp and MegaMedic Corp you can strategize the best options tra... View the full answer