straddle: Straddle Spread

Description Usage Arguments Details Value See Also Examples

Description

Gives a table and graphical representation of the payoff and profit of a long or short straddle for a range of future stock prices.

Usage

1
straddle(S,K,r,t,price1,price2,position,plot=FALSE)

Arguments

S

spot price at time 0

K

strike price of the call and put

r

continuously compounded yearly risk free rate

t

time of expiration (in years)

price1

price of the long call with strike price K

price2

price of the long put with strike price K

position

either buyer or seller of option ("long" or "short")

plot

tells whether or not to plot the payoff and profit

Details

Stock price at time t =S_t

Long Position:

For S_t<=K: payoff =K-S_t

For S_t>K: payoff =S_t-K

profit = payoff - (price1 + price2)*e^{r*t}

Short Position:

For S_t<=K: payoff =S_t-K

For S_t>K: payoff =K-S_t

profit = payoff + (price1 + price2)*e^{r*t}

Value

A list of two components.

Payoff

A data frame of different payoffs and profits for given stock prices.

Premiums

A matrix of the premiums for the call and put options, and the net cost.

See Also

straddle.bls

option.put

option.call

strangle

Examples

1
straddle(S=100,K=110,r=.03,t=1,price1=15,price2=10,position="short")

FinancialMath documentation built on May 1, 2019, 11:16 p.m.