Plotting option strategies with R

## description available at: http://reakkt.com

rm(list = ls()) # clear all

### sample strategies

# ## Put Hedging
#
# assetsN <- 2
#
# current.price <- 40
#
# assets.mat <- matrix(NA,assetsN,5)
# colnames(assets.mat) <- c("trans","type","strike","price","amount")
#
# assets.mat[1,] <- c("buy", "base", 40, 0, 1) # buy underlying
# assets.mat[2,] <- c("buy", "put",  35, 2, 1) # hedge with a OTM put
#
# price.range <- c(10,80)
# price.step  <- 1

## Sell short base

assetsN <- 2

current.price <- 40

assets.mat <- matrix(NA,assetsN,5)
colnames(assets.mat) <- c("trans","type","strike","price","amount")

assets.mat[1,] <- c("sell", "base", 40, 0, 1) # sell underlying
assets.mat[2,] <- c("buy", "call",  35, 2, 1) # hedge with a ITM call

price.range <- c(10,80)
price.step  <- 1

# ## Bull Call Spread
# # http://www.theoptionsguide.com/bull-call-spread.aspx
#
# assetsN <- 2
#
# current.price <- 42
#
# assets.mat <- matrix(NA,assetsN,5)
# colnames(assets.mat) <- c("trans","type","strike","price","amount")
#
# assets.mat[1,] <- c("buy",  "call",  40, 3, 1) # ITM call
# assets.mat[2,] <- c("sell", "call",  45, 1, 1) # OTM call
#
# price.range <- c(35,50)
# price.step  <- 1

# ## Call Backspread
# #  http://www.theoptionsguide.com/call-backspread.aspx
#
# assetsN <- 2
#
# current.price <- 43
#
# assets.mat <- matrix(NA,assetsN,5)
# colnames(assets.mat) <- c("trans","type","strike","price","amount")
#
# assets.mat[1,] <- c("sell",  "call",  40,  4, 1) # ITM call
# assets.mat[2,] <- c("buy",   "call",  45,  2, 2) # OTM call

# ## Condor
# # http://www.theoptionsguide.com/condor.aspx
#
# assetsN <- 4
#
# current.price <- 45
#
# assets.mat <- matrix(NA,assetsN,5)
# colnames(assets.mat) <- c("trans","type","strike","price","amount")
#
# assets.mat[1,] <- c("buy",  "call",  35,  11, 1)
# assets.mat[2,] <- c("buy",  "call",  55,  1, 1)
# assets.mat[3,] <- c("sell", "call",  40,  7, 1)
# assets.mat[4,] <- c("sell", "call",  50,  2, 1)

# ## some other strategy
# assetsN <- 3
#
# assets.mat <- matrix(NA,assetsN,5)
# colnames(assets.mat) <- c("trans","type","strike","price","amount")
#
# assets.mat[1,] <- c("sell",  "put",  500,  5,  1)
# assets.mat[2,] <- c("sell",  "put",  700,  10, 1)
# assets.mat[3,] <- c("buy",  "call", 1000,  15, 1)

###

if (!exists("price.range")) {

  price.range <- range(as.numeric(assets.mat[,"strike"]))*c(0.8,1.2)
  price.step  <- 0.1

}

x <- seq(price.range[1],price.range[2],price.step)

options.val <- matrix(NA,assetsN,length(x))

###

OptionVal <- function(x,trans,type,strike,premium,amount=1) {

  strike  <- as.numeric(strike)
  premium <- as.numeric(premium)
  amount  <- as.numeric(amount)

  if (trans=="buy" && type=="base")   value <- x-strike-premium

  if (trans=="sell" && type=="base")  value <- strike-x-premium

  if (trans=="buy" && type=="call")   value <- max(x-strike,0)-premium

  if (trans=="sell" && type=="call")  value <- premium-max(x-strike,0)

  if (trans=="buy" && type=="put")    value <- max(strike-x,0)-premium

  if (trans=="sell" && type=="put")   value <- premium-max(strike-x,0)

  return( amount*value )

}

for (i in 1:assetsN)

  options.val[i,] <- sapply( x, function(x)

                                  OptionVal(x,
                                            assets.mat[i,"trans"],
                                            assets.mat[i,"type"],
                                            assets.mat[i,"strike"],
                                            assets.mat[i,"price"],
                                            assets.mat[i,"amount"]) )

options.all <- colSums(options.val)

# rbind(x,options.all)

plot(options.all,
     main="Payoff",ylab="profit/loss",xlab="price",
     type="l",xaxt="n")
if (!is.null(current.price)) abline(v=which(x==current.price),col="Green",lwd=2)
abline(v=sapply(as.numeric(assets.mat[,"strike"]), function(s) which(x==s)),col="Blue",lty="dotted")
abline(h=0,col="Red",lty="dashed")
axis(1,seq(0,length(x),length.out=5),round(seq(min(x),max(x),length.out=5)))

assets.mat