SOLUTIONS
INVESTMENT OPTIMIZATION
SYST 798/OR 680
Capstone Project Proposal
Lee Vorthman
Isaac Rusangiza
Kindle Fell
Erik Adamson
Project Proposal
• Investment Optimization
▫ Problem: There is currently no known mathematical
model used for selling future stock options – presently
accomplished with vast market experience and general
“feel” for futures behavior
▫ Goal: Determine a method/strategy for optimizing
investment return with index future options
 A way to theoretically achieve a reasonably high probability of
making money from an investment through sales of both calls
and puts
 Put – As the seller, betting an option will increase/stay the same
 Call – As the seller, betting an option will decrease/stay the same
 Limited to S&P 500 index future options
Project Proposal
• Suggested Methods/Strategies
▫ Short Straddle Option Strategy
▫ Black-Scholes Model – market data
▫ Arbitrage Pricing Theory
• Characteristics to consider
▫ What price above and below strike
price to offset gains and losses
▫ When to sell
 Sit and wait versus dynamically buying and
selling in response to market activity
Project Proposal
• Planned Approach
▫ Propose a solution Model
▫ Simulation
 Using common programming
language or software
(MatLab, Arena, Java, Analytica)
 Find appropriate data or data model
▫ Continue using Spiral Development
 Refine Model and repeat
Project Proposal
• Planned Deliverables
▫ CONOPS
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Problem Statement
Market Analysis/research
Scope
Stakeholder Analysis
Top level requirements
Schedule (Gantt Chart)
Business Case/Justification
Simulation Model
Process Model/Description
Project Proposal
• Next Steps
▫ Project approval
▫ Determine high-level requirements and constraints
to judge any method or model being considered
 Further research on futures investment
 Continued interaction with primary stakeholder /
sponsor (Prof. Chang)
 Definition of Success (ROI, Risk vs. Return)
 Find appropriate set of data for modeling purposes
▫ Simulation and Test Plan
 Further research on suggested strategy while
searching for possible alternatives
Project Proposal
Questions?