roptions (version 1.0.3)

butterfly.call: Butterfly Call Spread Strategy Function

Description

This function can be used to develop a Butterfly call Spread Strategy.

Usage

butterfly.call(
  k1,
  k2,
  k3,
  c1,
  c2,
  c3,
  spread = c("long", "short"),
  llimit = 20,
  ulimit = 20
)

Arguments

k1

Excercise Price of 1st Long call Option (Long Spread)/ Excercise Price of 1st Short call Option (Short Spread)

k2

Excercise Price of Short call Option (Long Spread) / Excercise Price of Long call Option (Short Spread)

k3

Excercise Price of 2nd Long call Option (Long Spread) / Excercise Price of 2nd Short call Option (Short Spread)

c1

Premium of 1st Long call Option (Long Spread)/ Premium of 1st Short call Option (Short Spread)

c2

Premium of Short call Option (Long Spread) / Premium of Long call Option (Short Spread)

c3

Premium of 2nd Long call Option (Long Spread) / Premium of 2nd Short call Option (Short Spread)

spread

Type of Spread, Default: c("long", "short")

llimit

Lower limit of stock price at Expiration., Default: 20

ulimit

Upper Limit of Stock Price at Expiration, Default: 20

Value

OUTPUT_DESCRIPTION Returns the profit/loss generated from the strategy along with the profit/loss of individual contract and an interactive graph for the same.

Details

The long butterfly call spread is created by buying one in-the-money call option with a low strike price, writing two at-the-money call options, and buying one out-of-the-money call option with a higher strike price. The short butterfly spread is created by selling one in-the-money call option with a lower strike price, buying two at-the-money call options, and selling an out-of-the-money call option at a higher strike price.

Examples

# NOT RUN {
butterfly.call(100, 95, 105, 2.3, 1.25, 3.2, spread = 'long')
# }