bearishTrader (version 1.0.2)

stripExpirationValueVT: Calculates the Value/Payoff per share at expiration for Strip Option Strategy and draws its graph in the Plots tab.

Description

Calculates the Value/Payoff per share at expiration for Strip Option Strategy and draws its graph in the Plots tab.

Usage

stripExpirationValueVT(
  ST,
  X,
  C,
  P1,
  P2,
  hl = 0,
  hu = 2,
  xlab = "Spot Price ($) at Expiration",
  ylab = "Value / Payoff [ VT ] at Expiration ($)",
  main = "Strip [VT]"
)

Value

Returns a graph of the strategy.

Arguments

ST

Spot Price at time T.

X

Strike Price or eXercise price.

C

Call Premium or Call Price.

P1

Put Premium on first Put.

P2

Put Premium on second Put.

hl

lower bound value for setting lower-limit of x-axis displaying spot price.

hu

upper bound value for setting upper-limit of x-axis displaying spot price.

xlab

X-axis label.

ylab

Y-axis label.

main

Title of the Graph.

Author

MaheshP Kumar,

Details

According to conceptual details given by Cohen (2015), and a closed-form solution provided by Kakushadze and Serur (2018), this method is developed, and the given examples are created, to compute the Value/Payoff per share at expiration for Strip Option Strategy and draw its graph in the Plots tab. EXAMPLE, Buy HypoBeta December 9 call at $1.40 (outflow) and Buy two (2) HypoBeta December 9 Puts at $0.80 (outflow). This Strategy consists of a long call position (in an at-the-money call option) and a long position in two put options (at-the-money) with a strike price X. This is a net debit trade.

References

Cohen, G. (2015). The Bible of Options Strategies (2nd ed.). Pearson Technology Group. https://bookshelf.vitalsource.com/books/9780133964448
Kakushadze, Z., & Serur, J. A. (2018, August 17). 151 Trading Strategies. Palgrave Macmillan. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3247865

Examples

stripExpirationValueVT(9,9,1.4,0.80,0.80)
stripExpirationValueVT(40,40,2,1.25,1.25,hl=0.9,hu=1.2)
stripExpirationValueVT(1000,1000,8,5.50,6.50,hl=0.985,hu=1.022)