stripInitialValueV0: Displays per share Initial Net Debit (V0Dr) on initiation day...

In bearishTrader: Trading Strategies for Bearish Outlook

Displays per share Initial Net Debit (V0Dr) on initiation day for Strip Option Strategy and draws its graph in the Plots tab.

Description

Displays per share Initial Net Debit (V0Dr) on initiation day for Strip Option Strategy and draws its graph in the Plots tab.

Usage

stripInitialValueV0(
  ST,
  X,
  C,
  P1,
  P2,
  hl = 0.5,
  hu = 1.5,
  xlab = "Spot Price ($) at Expiration",
  ylab = " Initial Value [ V0] ($)",
  main = "Strip V0 [Dr/Cr]"
)

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.

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 Initial Net Debit (V0Dr) on initiation day 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 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 and involves three cash outflows in the form of premiums paid for buying one call option and two put options.

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

stripInitialValueV0(9,9,1.4,0.80,0.80)
stripInitialValueV0(40,40,2,1.25,1.25,hl=0.9,hu=1.2)
stripInitialValueV0(1000,1000,8,5.50,6.50,hl=0.99,hu=1.015)

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