strapStrategy {bullishTrader}

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

Description

This is a volatility strategy consisting of a long position in two ATM call options, and a long position in an ATM put option with a strike price K. This is a net debit trade. The trader or investor has bullish outlook (Kakushadze & Serur, 2018) .

Usage

strapStrategy(
  ST,
  X,
  C1,
  C2,
  P1,
  hl = 0,
  hu = 1.5,
  xlab = "Spot Price ($) on Expiration",
  ylab = "Profit / Loss [ PnL ] at Expiration ($)",
  main = "Strap Strategy ",
  sub = "bullishTrader / MaheshP Kumar"
)

Arguments

ST

Spot Price at time T.

X

Strike Price or eXercise price.

C1

Call Premium paid on bought first call.

C2

Call Premium paid on bought second call.

P1

Put Premium paid on bought Put.

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

This method is developed, and the given examples are created, to compute per share Profit and Loss at expiration and also the Breakeven (BE) point for a Strap Strategy and draws its graph in the Plots tab.

Value

returns a profit and loss graph of Strap Strategy.

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

strapStrategy(25,25,2.40,2.40,1.70)
strapStrategy(40,40,3,3,2,hl=0.7,hu=1.2)
strapStrategy(1000,1010,18,18,10,hl=0.955,hu=1.055)