| straddle {FinancialMath} | R Documentation |
Straddle Spread
Description
Gives a table and graphical representation of the payoff and profit of a long or short straddle for a range of future stock prices.
Usage
straddle(S,K,r,t,price1,price2,position,plot=FALSE)Arguments
S |
spot price at time 0 |
K |
strike price of the call and put |
r |
continuously compounded yearly risk free rate |
t |
time of expiration (in years) |
price1 |
price of the long call with strike price K |
price2 |
price of the long put with strike price K |
position |
either buyer or seller of option ("long" or "short") |
plot |
tells whether or not to plot the payoff and profit |
Details
Stock price at time t =S_t
Long Position:
For S_t<=K: payoff =K-S_t
For S_t>K: payoff =S_t-K
profit = payoff - (price1 + price2)*e^{r*t}
Short Position:
For S_t<=K: payoff =S_t-K
For S_t>K: payoff =K-S_t
profit = payoff + (price1 + price2)*e^{r*t}
Value
A list of two components.
Payoff |
A data frame of different payoffs and profits for given stock prices. |
Premiums |
A matrix of the premiums for the call and put options, and the net cost. |
See Also
Examples
straddle(S=100,K=110,r=.03,t=1,price1=15,price2=10,position="short")