Strangle Spread
Gives a table and graphical representation of the payoff and profit of a long strangle spread for a range of future stock prices.
strangle(S,K1,K2,r,t,price1,price2,plot=FALSE)
S |
spot price at time 0 |
K1 |
strike price of the long put |
K2 |
strike price of the long call |
r |
continuously compounded yearly risk free rate |
t |
time of expiration (in years) |
price1 |
price of the long put with strike price K1 |
price2 |
price of the long call with strike price K2 |
plot |
tells whether or not to plot the payoff and profit |
Stock price at time t =S_t
For S_t<=K1: payoff =K1-S_t
For K1<S_t<K2: payoff =0
For S_t>=K2: payoff =S_t-K2
profit = payoff - (price1 + price2)*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. |
K1 < S < K2 must be true.
Kameron Penn and Jack Schmidt
strangle(S=105,K1=100,K2=110,r=.03,t=1,price1=10,price2=15,plot=TRUE)
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