syntheticCall: Calculates Profit and Loss (PnL) per share (or unit of the...

In bullishTrader: Bullish Trading Strategies Through Graphs

Calculates Profit and Loss (PnL) per share (or unit of the underlying) and Breakeven point at expiration for Synthetic Call and draws its graph in the Plots tab.

Description

This strategy is also known as married put or protective put and results from buying stock and an ATM or OTM put option with a strike price X is less than or equal to S0. The trader or investor has bullish outlook. This is a hedging strategy, the put option hedges the risk of the stock price falling (Kakushadze & Serur, 2018).

Usage

syntheticCall(
  ST,
  X,
  P,
  S0,
  hl = 0,
  hu = 1.5,
  xlab = "Spot Price ($) on Expiration",
  ylab = "Profit / Loss [ PnL ] at Expiration ($)",
  main = "Synthetic Call/ Married put/ Protective put ",
  sub = "bullishTrader / MaheshP Kumar"
)

Arguments

ST	Spot Price at time T.
X	Strike Price or eXercise price.
P	Put Premium paid on bought Put.
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.
sub	Subtitle 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 Profit and Loss at expiration and Breakeven (BE) point for Synthetic Call and draws its graph in the Plots tab.

Value

returns a profit and loss graph of Synthetic Call.

Author(s)

MaheshP Kumar, [e-mail]

References

Cohen, G. (2015). The Bible of Options Strategies (2nd ed.). Pearson Technology Group.
Kakushadze, Z., & Serur, J. A. (2018, August 17). 151 Trading Strategies. Palgrave Macmillan. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3247865

Examples

syntheticCall(35,35,2.55,35.50)
syntheticCall(15,15,1.46,15.84,hl=0.6,hu=1.4)
syntheticCall(1000,1000,20,990,hl=0.98,hu=1.035)

bullishTrader documentation built on Oct. 14, 2022, 9:06 a.m.