R/14_strapGraph.R

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 Strap Strategy and draws its graph in the Plots tab.
#'@description
#'This is a volatility strategy consisting of a long position in two ATM call options, and a long position in an ATM put option with a strike price K. This is a net debit trade. The trader or investor has bullish outlook (Kakushadze & Serur, 2018) .
#'@details
#'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 a Strap Strategy and draws its graph in the Plots tab.
#'@param ST Spot Price at time T.
#'@param X Strike Price or eXercise price.
#'@param C1 Call Premium paid on bought first call.
#'@param C2 Call Premium paid on bought second call.
#'@param P1 Put Premium paid on bought 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.
#'@param sub Subtitle of the Graph.
#'@return returns a profit and loss graph of Strap Strategy.
#'@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
#'strapStrategy(25,25,2.40,2.40,1.70)
#'strapStrategy(40,40,3,3,2,hl=0.7,hu=1.2)
#'strapStrategy(1000,1010,18,18,10,hl=0.955,hu=1.055)
#'@export
strapStrategy <- function (ST,X,C1,C2,P1,hl=0,hu=1.5,xlab="Spot Price ($) on Expiration",ylab="Profit / Loss [ PnL ] at Expiration ($)",main="Strap Strategy ", sub="bullishTrader / MaheshP Kumar"){
  V0Dr=C1+C2+P1
  myData <- data.frame (spot = c((ST*hl):(ST*hu)))
  myData$pl <- (2*pmax((myData$spot-X),0)+(pmax((X-myData$spot),0))-V0Dr)
  oldpar <- par(no.readonly = TRUE)
  on.exit(par(oldpar))
  myData$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 )
  points(x=(X-V0Dr), y=0,cex = 2, pch = 23, col ="red",bg="gold")
  text((X-V0Dr)+2,1, labels=(X-V0Dr), adj = 0.1,col="goldenrod3")
  points(x=(X+V0Dr/2), y=0,cex = 2, pch = 23, col ="red",bg="gold")
  text((X+V0Dr/2)+2,1, labels=(X+V0Dr/2), adj = 0.1,col="goldenrod3")
  abline(h = 0,col = "gray")
  abline(v = X,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")
}