zLongSyntheticFuture {bullishTrader}

Calculates Profit and Loss (PnL) per unit of the underlying and Breakeven point at expiration for Long Synthetic Future and draws its graph in the Plots tab.

Description

This strategy results from buying a call of the option on Future and selling a put of the option on the Future of the same strike price with the same expiration. On initiation, this is a net debit Strategy and results in net cash inflow as premium received on shorting a put of the option on Future is less than premium paid on buying a call of the option on Future (Kakushadze & Serur, 2018). This Strategy precisely mimics the long future position (Cohen, 2015).

Usage

zLongSyntheticFuture(
  STF,
  XF,
  COF,
  POF,
  hl = 0,
  hu = 2,
  xlab = "Spot Price ($) on Expiration",
  ylab = "Profit / Loss [ PnL ] at Expiration ($)",
  main = " Long Synthetic Future ",
  sub = "bullishTrader / MaheshP Kumar"
)

Arguments

STF

Future contract price at time T.

XF

Strike Price of Option on Future.

COF

Call Premium paid on buying an Option on Future .

POF

Put premium received on shorting an Option on 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.

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 (per unit of the underlying) at expiration and Breakeven (BE) point for Long Synthetic Future and draws its graph in the Plots tab.

Value

returns a profit and loss graph of Long Synthetic Future.

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

zLongSyntheticFuture(12,14,4,2)
zLongSyntheticFuture(200,205,7,2,hl=0.95,hu=1.15)