R/19_stripExpirationValueVT.R

In bearishTrader: Trading Strategies for Bearish Outlook

#'Calculates the Value/Payoff per share at expiration for Strip Option Strategy and draws its graph in the Plots tab.
#'@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 the Value/Payoff per share at expiration 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 (2) HypoBeta December 9 Puts at $0.80 (outflow). This Strategy consists of a long call position (in an at-the-money call option) and a long position in two put options (at-the-money) with a strike price X. This is a net debit trade.
#'@param ST Spot Price at time T.
#'@param X Strike Price or eXercise price.
#'@param C Call Premium or Call Price.
#'@param P1 Put Premium on first Put.
#'@param P2 Put Premium on second Put.
#'@param hl lower bound value for setting lower-limit of x-axis displaying spot price.
#'@param hu upper bound value for setting upper-limit of x-axis displaying spot price.
#'@param xlab X-axis label.
#'@param ylab Y-axis label.
#'@param main Title of the Graph.
#'@return Returns a graph of the strategy.
#'@importFrom graphics abline
#'@importFrom graphics text
#'@importFrom graphics lines
#'@importFrom graphics par
#'@importFrom graphics plot
#'@author MaheshP Kumar, \email{maheshparamjitkumar@@gmail.com}
#'@references
#'Cohen, G. (2015). The Bible of Options Strategies (2nd ed.). Pearson Technology Group. https://bookshelf.vitalsource.com/books/9780133964448\cr
#'Kakushadze, Z., & Serur, J. A. (2018, August 17). 151 Trading Strategies. Palgrave Macmillan. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3247865
#'@examples
#'stripExpirationValueVT(9,9,1.4,0.80,0.80)
#'stripExpirationValueVT(40,40,2,1.25,1.25,hl=0.9,hu=1.2)
#'stripExpirationValueVT(1000,1000,8,5.50,6.50,hl=0.985,hu=1.022)
#'@export
stripExpirationValueVT <- function (ST,X,C,P1,P2,hl=0,hu=2,xlab="Spot Price ($) at Expiration",ylab="Value / Payoff [ VT ] at Expiration ($)", main="Strip [VT]"){
  myData <- data.frame (spot = c((ST*hl):(ST*hu)))
  oldpar <- par(no.readonly = TRUE)
  on.exit(par(oldpar))
  myData$pl <- (pmax((myData$spot-X),0)+2*pmax((X-myData$spot),0))
  myData$pl = round(myData$pl, digits=2)
  myData$spot = round(myData$spot, digits=2)
  par(mfrow = c(1,1))
  plot(myData$spot, myData$pl, pch=21, bg="cyan1",col="cyan1", xlab = xlab, ylab = ylab,col.lab="blue", main = main)
  text (myData$spot, myData$pl, labels = as.character(myData$pl), adj =-0.4,
        pos = NULL, offset = 0.3, vfont = NULL,
        cex = 0.6, col = "red", font = NULL )
  text(X+4,C+2, labels=as.character("Bearish / Neutral OUTLOOK"),adj = 1,col="darkblue")
  text(X+4,C, labels=as.character("VT @ Expiration"),  adj = 1,col = "brown" )
  abline(h = 0,col = "gray")
  abline(v = X,col = "gray")
  legend("topright", legend = "VT ",text.col ="snow",  bg ="midnightblue", pch=16, col="cyan1",cex = 1.1)
  lines(myData$spot,myData$pl,col ="blue")
}