R/22_shortComboExpirationValueVT.R

In bearishTrader: Trading Strategies for Bearish Outlook

#'Calculates the Value/Payoff per share at expiration for Short Combo and draws its graph in the Plots tab.
#'@description
#'Short Combo is also known as short risk reversal and results from buying a put option with a strike price X1L and selling a call option with a strike price X2H with the same expiration date.  Here, X2H > X1L. Outlook  of the trader (investor) is bearish. This strategy results in capital gain (Kakushadze & Serur, 2018).
#'@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 Short Combo and draw its graph in the Plots tab. EXAMPLE, Buy HypoCRM December 8 Put at $1.50 and short HypoCRM December 12 call at $2.00. This is a net credit trade as premium received on shorted call (CX1H) at a higher strike is more than the premium paid on the bought put (P1XL) at a lower strike.
#'@param ST Spot Price at time T.
#'@param X1L higher Strike Price or eXercise price.
#'@param X2H lower Strike Price or eXercise price.
#'@param PX1L Put Premium paid for the bought Put at Lower Strike.
#'@param CX2H Call Premium received for the sold Call at higher Strike .
#'@param hl lower bound value for setting lower-limit of x-axis displaying spot price.
#'@param hu upper bound value for setting upper-limit of x-axis displaying spot price.
#'@param xlab X-axis label.
#'@param ylab Y-axis label.
#'@param main Title of the Graph.
#'@return Returns a graph of the strategy.
#'@importFrom graphics abline
#'@importFrom graphics text
#'@importFrom graphics lines
#'@importFrom graphics par
#'@importFrom graphics plot
#'@author MaheshP Kumar, \email{maheshparamjitkumar@@gmail.com}
#'@references
#'Cohen, G. (2015). The Bible of Options Strategies (2nd ed.). Pearson Technology Group. https://bookshelf.vitalsource.com/books/9780133964448\cr
#'Kakushadze, Z., & Serur, J. A. (2018, August 17). 151 Trading Strategies. Palgrave Macmillan. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3247865
#'@examples
#'shortComboExpirationValueVT(10,8,12,1.50,2.00)
#'@export
shortComboExpirationValueVT<-function (ST,X1L,X2H,PX1L,CX2H,hl=0,hu=1.6,xlab="Spot Price ($) at Expiration",ylab=" Value / Payoff [VT] at Expiration ($)",main="Short Combo [ VT ]"){
  myData <- data.frame (spot = c((ST*hl):(ST*hu)))
  oldpar <- par(no.readonly = TRUE)
  on.exit(par(oldpar))
  myData$Val <-  (pmax(0,(X1L-myData$spot))-pmax(0,(myData$spot-X2H)))
  myData$Val = round(myData$Val, digits=2)
  myData$spot = round(myData$spot, digits=2)
  par(mfrow = c(1,1))
  plot(myData$spot, myData$Val, pch=21, bg="chartreuse2",col="chartreuse2",cex=1.1, xlab = xlab, ylab = ylab, col.lab="blue",main = main)
  text (myData$spot, myData$Val, labels = as.character(myData$Val), adj = -1.1,
        pos = NULL, offset = 0.5, vfont = NULL,
        cex = 0.7, col = "red", font = NULL )
   text(X1L-2.25,0.5, labels=as.character("PnL= VT + V0Cr"), adj = 1,col="darkblue")
  text(X1L-3,-0.5, labels=as.character("Bearish OUTLOOK"), adj = 1,col = "brown")
  abline(h = 0,col = "gray")
  abline(v = X1L,col = "gray", lty=5,lwd=2)
  abline(v = X2H,col = "gray", lty=5,lwd=2)
  abline(v = ,col = "gray",lty=5,lwd=2)
  lines(myData$spot,myData$Val,col = "blue")
}