volatilityTrader (version 1.0.1)

shortPutCondorPnL: Calculates per share Profit and Loss (PnL) at expiration for Short Put Condor Option Strategy and draws its Bar Plot displaying PnL in the Plots tab.

Description

This is a volatility strategy consisting of a short position in an OTM Put option with a strike price X1L, a long position in an OTM Put option with a higher strike price X2Ml, a long position in an ITM Put option with a strike price X3Mu, and a short position in an ITM Put option with a higher strike price X4H. All strikes are equidistant: X4H minus X3Mu equals to X3Mu minus X2Ml; equals to X2Mu minus X1L. This is a relatively low net credit trade. As with a short put butterfly, the potential reward is sizably smaller than with a short straddle or a short strangle (albeit with a lower risk). So, this is a capital gain (rather than an income) strategy. The trader or investor has neutral outlook (Kakushadze & Serur, 2018).

Usage

shortPutCondorPnL(
  ST,
  X1L,
  X2Ml,
  X3Mu,
  X4H,
  P1L,
  P2Ml,
  P3Mu,
  P4H,
  hl = 0,
  hu = 2,
  spot = spot,
  pl = pl,
  myData = myData,
  myTibble = myTibble,
  PnL = PnL
)

Value

graph of the strategy

Arguments

ST

Spot Price at time T.

X1L

Lower Strike Price or eXercise price for one ITM shorted Put.

X2Ml

Middle-low Strike Price or eXercise price for middle strike bought Put.

X3Mu

Middle-upper Strike Price or eXercise price for middle strike bought Put.

X4H

Higher Strike Price or eXercise price for one OTM shorted Put.

P1L

Put Premium or Put Price received for the one OTM shorted Put.

P2Ml

Put Premium or Put Price paid for the middle-low bought Put.

P3Mu

Put Premium or Put Price paid for the middle-upper bought Put.

P4H

Put Premium or Put Price received for the one ITM shorted 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.

spot

Spot Price

pl

Profit and Loss

myData

Data frame

myTibble

tibble

PnL

Profit and Loss

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 per share Profit and Loss at expiration for Short Put Condor Option Strategy and draw its graph in the Plots tab.

Examples

shortPutCondorPnL(52,45,50,55,60,2,3,7,10.)
shortPutCondorPnL(425,400,420,440,460,16,22,35,50,hl=0.9,hu=1.125)