box.spread: Box Spread Strategy Function

In roptions: Option Strategies and Valuation

Description

This function can be used to develop a box spread strategy for options. A box spread is an options arbitrage strategy that combines buying a bull call spread with a matching bear put spread

Usage

box.spread(
  k_long_call,
  k_short_call,
  k_long_put,
  k_short_put,
  c1,
  c2,
  p1,
  p2,
  llimit = 20,
  ulimit = 20
)

Arguments

k_long_call	Excercise Price of Long call Option
k_short_call	Excercise Price of Short call Option
k_long_put	Excercise Price of Long Put Optioon
k_short_put	Excercise Price of Short Put Option
c1	Premium of Long Call Option
c2	Premium of Short Call Option
p1	Premium of Long Put Option
p2	Premium of Short Put Option
llimit	Lower limit of stock price at Expiration., Default: 20
ulimit	Upper Limit of Stock Price at Expiration, Default: 20

Details

To construct a box spread, a trader buys an in-the-money (ITM) call, sells an out-of-the-money (OTM) call, buys an ITM put and sells an OTM put. In other words, buy an ITM call and put and then sell an OTM call and put.

Value

Returns the profit/loss generated from the strategy along with the profit/loss of individual contract and an interactive graph for the same.

Examples

box.spread(100, 105, 95, 110, 3.2, 2.6, 1.1, 2.4)

roptions documentation built on July 8, 2020, 7:30 p.m.