R/03_callRatioBackspread.R

In bullishTrader: Bullish Trading Strategies Through Graphs

#'Calculates Profit and Loss (PnL) per share (or unit of the underlying) and Breakeven (BE) point at expiration for Call Ratio Backspread and draws its graph in the Plots tab.
#'@description
#'This strategy consists of a short position one (or two) call options with a strike price X1L, and and buying two (or three) call options with a strike price X2H. The outlook of trader or investor is strongly bullish (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 per share Profit and Loss at expiration and also the Breakeven (BE) point for Call Ratio Backspread and draws its graph in the Plots tab. EXAMPLE, Buying two HypoERP December 30 calls at $2.50 and shorting HypoERP December 25 put at $4.90
#'@param ST Spot Price at time T.
#'@param X2H Higher Strike Price or eXercise price.
#'@param X1L Lower Strike Price or eXercise price.
#'@param CX1L Call Premium paid for the bought Calls at Lower Strike.
#'@param CX2H Call Premium received for the sold Calls at higher Strike.
#'@param hl lower bound value for setting lower limit of X axis displaying spot price.
#'@param hu upper bound value for setting upper limit of X axis displaying spot price.
#'@param xlab X axis label.
#'@param ylab Y axis label.
#'@param main Title of the Graph.
#'@param sub Subtitle of the Graph.
#'@return returns a profit and loss graph of Call ratio backspread.
#'@importFrom graphics abline
#'@importFrom graphics points
#'@importFrom graphics text
#'@importFrom graphics lines
#'@importFrom graphics par
#'@importFrom graphics plot
#'@importFrom graphics legend
#'@importFrom graphics axis
#'@author MaheshP Kumar, \email{maheshparamjitkumar@@gmail.com}
#'@references
#'Cohen, G. (2015). The Bible of Options Strategies (2nd ed.). Pearson Technology Group.\cr
#'Kakushadze, Z., & Serur, J. A. (2018, August 17). 151 Trading Strategies. Palgrave Macmillan. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3247865
#'@examples
#'callRatioBackspread(25,30,25,2.50,4.90)
#'callRatioBackspread(25,30,25,2.20,4.90)
#'@export
callRatioBackspread <- function (ST,X2H,X1L,CX2H,CX1L,hl=0,hu=1.7,xlab="Spot Price ($) on Expiration",ylab="Profit / Loss [ PnL ] at Expiration ($)",main="Call Ratio Backspread ", sub="bullishTrader / MaheshP Kumar"){
  V0Dr= 2*CX2H-CX1L
  myData <- data.frame (spot = c((ST*hl):(ST*hu)))
  myData$pl <-  ((2*(pmax(0,(myData$spot-X2H)))-pmax(0,(myData$spot-X1L))- V0Dr))
  myData$pl = round(myData$pl, digits=2)
  myData$spot = round(myData$spot, digits=2)
  oldpar <- par(no.readonly = TRUE)
  on.exit(par(oldpar))
  myData$pl = round(myData$pl, digits=2)
  myData$spot = round(myData$spot, digits=2)
  par(mfrow = c(1,1), bg="azure1",las=1,mai=c(1.12, 0.92, 0.82, 0.82))
  plot(myData$spot, myData$pl, pch=21, bg="cyan1",col="cyan1", xlab = xlab, ylab = ylab,col.lab="springgreen4", cex.lab= 1.1, main = main,col.main="violetred", col.sub="lightsteelblue2", sub=sub,cex.sub=0.8,xaxt="n")
  text (myData$spot, myData$pl, labels = as.character(myData$pl), adj=-0.25,
        pos = NULL, offset = 0.3, vfont = NULL,
        cex = 0.5, col = "red", font = NULL )
  if (V0Dr<=0){
    points(x=(X1L-V0Dr/1), y=0,cex = 2, pch = 23, col ="red",bg="gold")
    text((X1L-V0Dr/1),0.50, labels=(X1L-V0Dr/1), adj = 0.1,col="goldenrod3")
    }
     points(x=(2*X2H-1*X1L+V0Dr)/(2-1), y=0,cex = 2, pch = 23, col ="red",bg="gold")
     text((2*X2H-1*X1L+V0Dr)/(2-1),0.50, labels=(2*X2H-1*X1L+V0Dr)/(2-1), adj = 0.1,col="goldenrod3")
  abline(h = 0,col = "gray")
  abline(v = X2H,col = "gray",lty=5,lwd=1.25)
  abline(v = X1L,col = "gray",lty=5,lwd=1.25)
  legend("topleft", legend = c("PnL Point","BE Point"),text.col ="snow",  bg ="darkorchid4", pch=c(16,18), col=c("cyan1","gold"),cex = 1)
  lines(myData$spot,myData$pl,col = "blue")
  axis(4, at=myData$pl,labels=myData$pl, col.axis="red", las=2,cex.axis=0.8,col.ticks ="lightsteelblue2")
  axis(1, at=myData$spot,labels=myData$spot,col.axis="blue",las=1,cex.axis=0.7,col.ticks = "lavenderblush2")
}