Lucas Wang: Stop-Loss Strategy
(3 pages of text)
Case (Gen Exp)
On February 29, 2016, an investor, who was a business school graduate, purchased one share of Tesla Motors, Inc. stock for $191.93. In doing so, the investor wondered what trading strategy should be followed over the next six months to maximize returns while minimizing risk. In choosing a strategy, he wanted to make good use of the knowledge gained from his financial analytics classes. To that end, he did not know if he should choose a buy and hold, or a stop-loss strategy with an optimal stop-loss threshold. The investor wondered how he would make this decision. Would a six month comparison of the stop-loss strategy with thresholds from 1 per cent to 99 per cent versus the buy and hold strategy resolve his dilemma?
This case is suitable for use in MBA and other graduate-level programs in courses on financial analytics and stock trading strategies. After completion of the case, students will be able to:
- evaluate stop-loss and buy and hold strategies;
- calculate the lognormal model for a stock price;
- determine an efficient frontier for stop-loss strategies;
- use simulation to evaluate trading strategies and risk preference; and
- use @RISK software to calculate returns.
$5.30 CAD / $5.00 USD Printed Copy
$4.50 CAD / $4.25 USD Permissions
$4.50 CAD / $4.25 USD Digital Download