Protective Put
Gives a table and graphical representation of the payoff and profit of a protective put strategy for a range of future stock prices.
protective.put(S,K,r,t,sd,price=NA,plot=FALSE)
S |
spot price at time 0 |
K |
strike price |
r |
continuously compounded yearly risk free rate |
t |
time of expiration (in years) |
sd |
standard deviation of the stock (volatility) |
price |
specified put price if the Black Scholes pricing is not desired (leave as NA to use the Black Scholes pricing) |
plot |
tells whether or not to plot the payoff and profit |
Stock price at time t =S_t
For S_t<=K: payoff =K-S
For S_t>K: payoff =S_t-S
profit = payoff - price*e^{r*t}
A list of two components.
Payoff |
A data frame of different payoffs and profits for given stock prices. |
Premium |
The price of the put option. |
Finds the put price by using the Black Scholes equation by default.
Kameron Penn and Jack Schmidt
protective.put(S=100,K=100,r=.03,t=1,sd=.2) protective.put(S=100,K=90,r=.01,t=.5,sd=.1)
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