modifiedPutButterfly {bullishTrader}

Calculates Profit and Loss (PnL) per share (or unit of the underlying) at expiration and Breakeven (BE) point for Modified Put Butterfly and draws its graph in the Plots tab.

Description

This is a variation of the long put butterfly strategy and the strikes are no longer equidistant; instead we have X3H minus X2M is less than X2M minus X1L. This results in a sideways strategy with a bullish bias (Cohen,2015).

Usage

modifiedPutButterfly(
  ST,
  X1L,
  X2M,
  X3H,
  P1XL,
  PX2M,
  PX3H,
  hl = 0.8,
  hu = 1.3,
  xlab = "Spot Price ($) at Expiration",
  ylab = " Profit / Loss [ PnL ] at Expiration ($)",
  main = "Modified Put Butterfly ",
  sub = "bullishTrader / MaheshP Kumar"
)

Arguments

ST

Spot Price at time T.

X1L

Lower Strike Price or eXercise price.

X2M

Medium Strike Price or eXercise price.

X3H

Higher Strike Price or eXercise price.

P1XL

Put Premium Paid for the bought Put at Lower Strike.

PX2M

Put Premium received from the sold Put at Medium Strike.

PX3H

Put Premium paid for the bought Put at higher Strike .

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 and formula given by Cohen (2015), this method is developed, and the given examples are created, to compute per share Profit and Loss and Breakeven (BE) point at expiration for Modified Put Butterfly and draw its graph in the Plots tab.

Value

Returns a graph Modified Put Butterfly.

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

modifiedPutButterfly(50,45,55,60,0.98,6.12,10.28)
modifiedPutButterfly(1000,980,1020,1030,10,60,100,hl=0.97,hu=1.05)