longPutSyntheticStraddlePnL {volatilityTrader}

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

Description

This volatility strategy (which is the same as a long straddle with the call replaced by a synthetic call) amounts to buying stock and buying two ATM (or the nearest ITM) put options with a strike price X. The outlook of investor or trader is neutral. This is capital gain strategy. This is a capital gain strategy (assuming S0 is less than or equal to X and V0 is greater than (X minus S0)) (Kakushadze & Serur, 2018).

Usage

longPutSyntheticStraddlePnL(
  ST,
  X,
  P1,
  P2,
  S0,
  hl = 0,
  hu = 2,
  spot = spot,
  pl = pl,
  myData = myData,
  myTibble = myTibble,
  PnL = PnL
)

Arguments

ST

Spot Price at time T.

X

Strike Price or eXercise price.

P1

Put Premium or Put Price paid for the first bought Put.

P2

Put Premium or Put Price paid for the second bought Put.

S0

Stock Price at which the stock is bought.

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 Put Synthetic Straddle Option Strategy and draw its graph in the Plots tab.

Value

graph of the strategy

Examples

longPutSyntheticStraddlePnL(25,25,2,2,25.10)
longPutSyntheticStraddlePnL(40,40,5,5.2,40.2,hl=0.3,hu=1.7)