Straddle Spread - Black Scholes
Gives a table and graphical representation of the payoff and profit of a long or short straddle for a range of future stock prices. Uses the Black Scholes equation for the call and put prices.
straddle.bls(S,K,r,t,sd,position,plot=FALSE)
S |
spot price at time 0 |
K |
strike price of the call and put |
r |
continuously compounded yearly risk free rate |
t |
time of expiration (in years) |
sd |
standard deviation of the stock (volatility) |
position |
either buyer or seller of option ("long" or "short") |
plot |
tells whether or not to plot the payoff and profit |
Stock price at time t =S_t
Long Position:
For S_t<=K: payoff =K-S_t
For S_t>K: payoff =S_t-K
profit = payoff-(price_{call}+price_{put})*e^{r*t}
Short Position:
For S_t<=K: payoff =S_t-K
For S_t>K: payoff =K-S_t
profit = payoff+(price_{call}+price_{put})*e^{r*t}
A list of two components.
Payoff |
A data frame of different payoffs and profits for given stock prices. |
Premiums |
A matrix of the premiums for the call and put options, and the net cost. |
straddle.bls(S=100,K=110,r=.03,t=1,sd=.2,position="short") straddle.bls(S=100,K=110,r=.03,t=1,sd=.2,position="long",plot=TRUE)
Please choose more modern alternatives, such as Google Chrome or Mozilla Firefox.