BRN 481 Case #4: due 6/7/2017


The course web page has an Excel spreadsheet file (in ZIP format) BRN481Case417.ZIP that contains four tabs:

  1. BWLD has one year of daily returns to Buffalo Wild Wings stock (6/6/2016-6/2/2017).

  2. Options has last trade prices, along with bid and ask quotes, for call and put options on BWLD stock. The exercise prices vary between 145 and 160, and the expiration dates are 6/16/2017 and 7/21/2017.

  3. Tbills has quotes on Treasury bills with maturities of 6/15/2017, 7/20/2017, 9/14/2017, and 12/7/2017.

  4. Futures has last trade prices for E-mini contracts on the S&P 500 futures contracts with expiration dates of 6/16/2017, 9/15/2017, and 12/15/2017.

Answer the following questions:

  1. Are there any obvious profit opportunities (violations of boundary conditions) available in buying or selling BWLD call or put options? If so, explain what you would have to do to “make money.” If not, explain why you concluded that there were no arbitrage opportunities.

  2. Use the Excel spreadsheet discussed in class, OPTIONS.XLSM (in self-extracting ZIP format on the web page), to analyze the call and put option prices for BWLD.

    • How do the market prices for the call options compare with the Black-Scholes model prices? Can you explain any differences that you see?

    • Estimate the implied variance of BWLD. Explain how you calculated this variance. Is the variance rate the same for different time horizons? (e.g., June and July?) Why or why not?

  3. The S&P futures contract seems to imply that the futures market is pessimistic about the U.S. stock market (since futures prices are below the current level of the S&P index). Does this mean that the “Trump rally” is over? Or, is this “Fake News”? Explain.


A full-text version of this case assignment is available in Acrobat's portable data format (.pdf). The file is about 28K and can only be viewed (and printed) using a copy of Acrobat Reader. Click here to download this case assignment.


Click here to view a possible answer to this case.

Click here to download the Excel worksheet with the answer.


Click here to see the histogram showing the grades for this case.

A histogram showing the grades for this case is available in Acrobat's portable data format (.pdf). The file is about 4K and can only be viewed (and printed) using a copy of Acrobat Reader.

Click here to download this graph.


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Last Updated on 6/4/2017