bullishTrader (version 1.0.1)

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

Description

This is a variation of the long call 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 (Kakushadze & Serur, 2018).

Usage

modifiedCallButterfly(
  ST,
  X1L,
  X2M,
  X3H,
  CX1L,
  CX2M,
  CX3H,
  hl = 0.8,
  hu = 1.3,
  xlab = "Spot Price ($) at Expiration",
  ylab = " Profit / Loss [ PnL ] at Expiration ($)",
  main = "Modified Call Butterfly ",
  sub = "bullishTrader / MaheshP Kumar"
)

Value

Returns a graph Modified Call Butterfly.

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.

CX1L

Call Premium Paid for the bought Call at Lower Strike.

CX2M

Call Premium received from the sold Call at Medium Strike.

CX3H

Call Premium paid for the bought Call 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.

Author

MaheshP Kumar,

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 and Breakeven (BE) point at expiration for Modified Call Butterfly and draw its graph in the Plots tab.

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

Cohen, G. (2015). The Bible of Options Strategies (2nd ed.). Pearson Technology Group. https://bookshelf.vitalsource.com/books/9780133964448
Kakushadze, Z., & Serur, J. A. (2018, August 17). 151 Trading Strategies. Palgrave Macmillan. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3247865

Examples

modifiedCallButterfly(50,45,55,60,6.12,1.30,0.50)
modifiedCallButterfly(1000,980,1020,1030,60,20,7,hl=0.97,hu=1.05)