A floor, a band and a partial floor, each priced for a composite copper producer and tested outcome by outcome, make up this GF561 Unit 5 option strategy case. Searches like "gf 561 unit 5 assignment example", "gf561 unit 5 sample" and "gf561 unit 5 example" land here.
What a finished GF561 Unit 5 option strategy case looks like
A case report of about five pages with one decision table at its center. The producer expects to sell six million pounds priced off the three-month futures, now 4.20 a pound, with volatility at 24 percent and a 4.2 percent rate. Selling 240 futures contracts locks 4.20. A put struck at 4.00 costs 0.111 a pound, 666,000 in total, and sets a floor near 3.89 while keeping the upside. Buying that put and selling a call at 4.43 costs almost nothing and confines the price to a band from 4.00 to 4.43. The put spread, 4.00 bought and 3.60 sold, costs 0.089 but protects only between those strikes, so at 3.40 the producer realizes 3.71 rather than 3.89.
How a GF561 Unit 5 example is structured
The case opens with the exposure stated precisely: quantity, timing, the price the producer's sales contract references, and the one number management watches, a quarterly realized price below 3.85 that would breach a loan covenant. Pricing follows, with Black's model for options on futures written once and each premium computed from it. The zero-cost strike is found by solving for the call whose premium matches the put's, and the paper shows that search rather than announcing 4.43. The decision table lists realized price per pound for each strategy at outcomes of 3.40, 3.80, 4.20, 4.60 and 5.00. A paragraph per strategy then says in one sentence what it buys and what it gives up, and the recommendation ties the choice back to the covenant.
Exposure with a threshold
Six million pounds, one quarter, and a covenant that bites below 3.85 a pound give every strategy a pass line before any premium is computed.
Black's model for futures options
Premiums come from the futures version of the closed form, so no dividend or storage adjustment is needed, and the case gives its reason for preferring that version.
Solving for the call strike
Premiums at trial strikes of 4.40 and 4.45 bracket the put's 0.111, and interpolation lands on 4.43, where the collar costs close to zero.
One table, five outcomes
Realized prices for all four strategies from 3.40 to 5.00 sit in a single grid, which makes the put spread's shortfall at the low end impossible to miss.
What each choice buys
Certainty, insurance, a band and a partial floor are each named in one sentence, alongside what the producer surrenders to obtain them.
Where marks go in GF561 Unit 5
Strategy cases lose most when positions are described by name and never by outcome, a collar called prudent with no table showing what it delivers at a low price and a high one. Premiums taken from nowhere cost method credit, and so does applying the share-option formula to options on futures without adjusting for the futures price. A zero-cost collar reported as free, with no statement of the upside surrendered above the call strike, misstates what it buys. Put spreads draw the sharpest comment when the paper omits the gap below the lower strike, since that tail is exactly where a producer needs protection. Graders also expect margin on the short futures and the sold call to be mentioned, along with the gap between the futures price and the producer's own realized price.
Get a GF561 Unit 5 example written to your instructions
Where the GF561 Unit 5 case names its own producer, exposure and strikes, forward those details and the rubric; absent a case, the composite copper producer serves. Premiums are priced from a stated model and every strategy is tested at the same outcomes. The first custom sample is not billed and is usually back within 24-48h.
GF561 Unit 5 questions, answered
Is a zero-cost collar really free?
It costs no premium at inception, which is all zero-cost means. The producer pays by giving up every cent above the call strike, 4.43 in the sample, so at a futures price of 5.00 the collar delivers 4.43 while an unhedged sale would have delivered 5.00. The sample reports that forgone upside beside the premium saved, since the two belong in one comparison.
Why use Black's model rather than Black-Scholes?
Because the options in the case are written on futures, not on the metal itself. Black's model treats the futures price as the underlying, which needs no carry or storage adjustment, and many texts present it as a variant of Black-Scholes. The sample names the model, writes the formula once and applies it to every premium, so the grader sees consistent pricing.
How should the case handle margin?
By naming who posts it and when. Short futures and the sold call require margin that rises when prices climb against them, while a bought put requires only its premium. The sample notes the margin exposure of each strategy in a column of the decision table, because a hedge that cannot be funded through a price spike is not one a treasurer can approve.