protectiveCallInitialValueV0: Displays per share Net Credit (V0Cr) on initiation day for...

In bearishTrader: Trading Strategies for Bearish Outlook

Displays per share Net Credit (V0Cr) on initiation day for Protective Call and draws its graph in the Plots tab.

Description

Displays per share Net Credit (V0Cr) on initiation day for Protective Call and draws its graph in the Plots tab.

Usage

protectiveCallInitialValueV0(
  ST,
  X,
  C,
  S0,
  hl = 0.5,
  hu = 1.5,
  xlab = "Spot Price ($)",
  ylab = "Initial Value V0 ($)",
  main = "Protective Call / Married Call / SyntheticPut"
)

Arguments

ST	Spot Price at time T.
X	Strike Price or eXercise price.
C	Call Premium.
S0	Initial Stock Price.
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.

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 Net Credit (V0Cr) on initiation day for Protective Call and draw its graph in the Plots tab. EXAMPLE, Short HypoMedia stock at $14.00 (inflow) and buy HypoMedia December 15 call at $2.00 (outflow). This is a net credit trade as the net cash inflow equals shorted price realized minus call premium (call price) paid on call purchase.

Value

Returns a graph of the strategy.

Author(s)

MaheshP Kumar, [e-mail]

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

protectiveCallInitialValueV0(15,15,2,14)
protectiveCallInitialValueV0(50,50,3,48,hl=0.8,hu=1.2)
protectiveCallInitialValueV0(1000,1000,20,998,hl=0.995,hu=1.01)

bearishTrader documentation built on Oct. 6, 2022, 5:12 p.m.