1. Project Finance Equity
Equity Options Trade ideas
Student: Thu-Phuong Do
Professor: Aymeric Kalife
(*) In order to analyze the possible scenarios, I use the Black-Scholes pricing formula to obtain the price
of option with the following hypotheses: (i) Volatility: Current observed implied volatility, (ii) Risk free-
rate: 2.5%

2. OPTION TRADE IDEA: 24-FEB-2014
Student: Thu-Phuong DO
–
TOTAL SA
Call Spread Apr-14 €46-€50
Directional view
Earnings are on track. Current stock performance
is supported by dividend increase and peaked
capex cycle. No unexpected change in forward
guidance both on free cash flow and production.
There is still 3.8% upside to target price (i.e. €46).
Volatility analysis
The 3M ATM implied volatility is at its lows since
Jan 2014 (slightly above 15%). Though the realized
volatile tends to increase, it is still much lower
than its recent record high in Aug 2013. Hence, we
can benefit from this cheap volatility.
Proposed strategy
I suggest entering into call spread Apr-14 €46-€50:
pay €1.36 to long call Apr-14 €46 and short call
Apr-14 €50 for a premium of €0.17 to reduce the
cost of strategy. We pay the upfront of €1.19 for
this strategy. The expiry of option is structured
before the next earning announcement which is
supposedly on Apr 25th
2014 to avoid any
unexpected sharp stock price movement.
This strategy is designed for the investors who
share the bullish view on this stock. You can
outperform the long position when the stock price
is above the break-even level of €46.17. They do
not see either near-term sharp fall far under
current price or near-term rally. In contrast, should
the stock price fluctuate among our desired range,
this strategy outperforms long position.
Potential risks
Major risk will occur if the stock price decline
sharply below current level of €46. In this case,
you underperform long position by the premium
paid to enter into this strategy.
Total SA Stock price
Implied and Realized volatility
Scenario analysis

3. OPTION TRADE IDEA: 24-FEB-2014
Student: Thu-Phuong DO
–
AIRBUS GROUP NV
Short Put Mar-14 €53
Directional view
up 2013 u g BIT xp c b
w h c u m g m gu c .
Q4 EBIT result which will be announced on 26 Feb
2014 should be up 50 bps YoY. However, that
figure is impacted by the one-off charges which
are hard to provide any great precision. The target
price is still about 14% upside.
Volatility analysis
The 3M ATM implied volatility has risen to 28%,
near its 3-month highs. The realized volatility is
also at its highest level from 3 months. In addition,
we notice the inverted ATM implied volatility
structure: the implied volatility is highest in the
very near-term and then decreases. We can take
advantage of this rich volatility to consider a sell
strategy and capture volatility after earnings
announcement.
Proposed strategy
I suggest writing put Mar-14 €53 and receive the
premium of €1.65, which is about 3.1% of the
notional value. This strategy is designed for the
investors who want to benefit the rich volatility in
the near-term.
If you do not own stocks, your maximum profit will
be the premium. Should the stock price falls below
€51.35, you will lose proportionately to the
payoffs.
If you long Airbus stock, this strategy will provide a
better performance than the long position by the
premium should the price remain above €53.
Potential risks
You will suffer substantially loss in such event that
the stock price plummets far beyond the current
level.
Airbus Stock price
Implied and Realized volatility
Scenario analysis