longBoxPnL {volatilityTrader}

Calculates per share Profit and Loss (PnL) at expiration for Long Box Option Strategy and draws its Bar Plot displaying PnL in the Plots tab.

Description

The Long Box is a complex strategy that can (in some jurisdictions) have beneficial effects for tax planning from year to year. If your incentive for this strategy is a tax play, you should consult with your tax advisor beforehand to evaluate whether or not it is valid where you live and trade to invest (Cohen, 2015).
This volatility strategy can be viewed as a combination of a bull call spread and a bear put spread, and consists of a long position in an ITM put option with a strike price X1H, a short position in an OTM put option with a lower strike price X2, a long position in an ITM call option with the strike price X2, and a short position in an OTM call option with the strike price X1H. The trader or investor has an outlook that is neutral (Kakushadze & Serur, 2018).

Usage

longBoxPnL(
  ST,
  X1H,
  X2,
  P1,
  C2,
  P3,
  C4,
  hl = 0,
  hu = 2,
  spot = spot,
  pl = pl,
  myData = myData,
  myTibble = myTibble,
  PnL = PnL
)

Arguments

ST

Spot Price at time T.

X1H

Higher Strike Price or eXercise price for one ITM long Put and one OTM shorted call .

X2

Strike Price or eXercise price for one shorted Put and one long call.

P1

Put Premium or Put Price received for the shorted Put.

C2

Put Premium or Put Price paid for the bought Call.

P3

Put Premium or Put Price paid for the bought Put.

C4

Call Premium or Put Price received for the shorted Call.

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.

spot

Spot Price

pl

Profit and Loss

myData

Data frame

myTibble

tibble

PnL

Profit and Loss

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 for Long Box Option Strategy and draw its graph in the Plots tab.

Value

graph of the strategy

Examples

longBoxPnL(34,40,30,1,6,7,2)