coveredShortStraddle {bullishTrader}

Calculates Profit and Loss (PnL) per share (or unit of the underlying) and Breakeven point at expiration for Covered Short Straddle and draws its graph in the Plots tab.

Description

This strategy amounts to augmenting a covered call by writing a put option with the same strike price(X) and time-to-maturity (TTM) as the sold call option and thereby increasing the income (Kakushadze & Serur, 2018).

Usage

coveredShortStraddle(
  ST,
  X,
  C,
  P,
  S0,
  hl = 0,
  hu = 1.5,
  xlab = "Spot Price ($) on Expiration",
  ylab = "Profit / Loss [ PnL ] at Expiration ($)",
  main = "Covered Short Straddle ",
  sub = "bullishTrader / MaheshP Kumar"
)

Arguments

ST

Spot Price at time T.

X

Strike Price or eXercise price.

C

Call Premium received on shorted call.

P

Put Premium received on shorted Put.

S0

Initial Stock Price

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.

sub

Subtitle of the Graph.

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 Breakeven (BE) point for Covered Short Straddle and draws its graph in the Plots tab.

Value

returns a profit and loss graph of Covered Short Straddle.

Author(s)

MaheshP Kumar, [e-mail]

References

Cohen, G. (2015). The Bible of Options Strategies (2nd ed.). Pearson Technology Group.
Kakushadze, Z., & Serur, J. A. (2018, August 17). 151 Trading Strategies. Palgrave Macmillan. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3247865

Examples

coveredShortStraddle(17,17,1.44,3.56,15.84)
coveredShortStraddle(50,50,4,11,48,hl=0.7,hu=1.2)
coveredShortStraddle(1000,1000,10,33,990,hl=0.97,hu=1.015)