mafipy.function.payoff_bull_spread

mafipy.function.payoff_bull_spread(underlying, lower_strike, upper_strike, gearing=1.0)

Buy call option with lower_strike \(K_{\mathrm{lower}}\) and sell put option with upper_strike \(K_{\mathrm{upper}}\). As the name denotes, lower_strike is lower than upper_strike. Payoff formula is as follows:

\[g(\max(S - K_{\mathrm{lower}}, 0) - \min(S - K_{\mathrm{upper}}, 0)) = g\min(K_{\mathrm{upper}}, \max(S - K_{\mathrm{lower}}))\]

where \(S\) is underlying, \(g\) is gearing.

Parameters:

• underlying (float) –
• lower_strike (float) –
• upper_strike (float) –
• gearing (float) – coefficient of this option. Default value is 1.

Returns:

payoff of bull spread option. If lower_strike >= upper_strike, then return 0.

Return type:

float