zShortingStockIndexFutureAtFairValue {bearishTrader}

Calculates Profit and Loss at closeout of shorted a Stock Index Future (like Micro E-mini) and draws its graph in the Plots tab.

Description

On initiation, this is a net credit Strategy and results in net cash inflow in the form of receiving the amount of shorted Stock Index Future. On the day of the closeout the trader or investor has to buy the underlying at the price at the time of closeout. If the bearish outlook of the trader is as expected and the Stock Index Future (like Micro E-mini) falls then the trader makes the profit as shown in the graph (TD Ameritrade, 2019).

Usage

zShortingStockIndexFutureAtFairValue(
  SIT,
  SI0,
  R,
  d,
  n,
  hl = 0.9995,
  hu = 1.006,
  xlab = "Stock Index at closeout",
  ylab = " Profit / Loss [PnL] at closeout ($)",
  main = "Shorting a Stock Index like Micro E-mini S & P 500 [ PnL]"
)

Arguments

SIT

Stock Index at time T.

SI0

Stock Index Initial Value.

R

annualized financing rate

d

dividend yield of the index.

n

represents days in Future like 90day Stock Index Future.

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.

Details

According to the information provided by TD Ameritrade (2019) and Hull (2022), this method is developed, and the given examples are created, to compute Profit and Loss at closeout of shorted a Stock Index Future (like Micro E-mini) and draw its graph in the Plots tab.

Value

Returns a graph of the strategy.

Author(s)

MaheshP Kumar, [e-mail]

References

TD Ameritrade. (2019, July 26). Micro E-Mini Futures Contracts. YouTube.https://youtu.be/SShGjJepCdA
Hull, J. C. (2022). Options, Futures, and Other Derivatives (11th ed.). Pearson Education (US). https://bookshelf.vitalsource.com/books/9780136940043.

Examples

zShortingStockIndexFutureAtFairValue(3700,3709,0.0275,0.02,90)
zShortingStockIndexFutureAtFairValue(2900,2910,0.025,0.03,90,hl=0.9995,hu=1.005)