and I have used an online tutorial to calculate
payoff at expiry but I am having difficulty simulating the payoff before expiration.
What I have done so far,
# payoff for long call long call premium = bs_model() long call payoff = max(spot-strike,0)-long call premium # payoff for short call short call premium = bs_model() short call payoff = -1*(max(spot-strike,0)- short call premium) # Theoretical P&L theoretical p&l= long call payoff + short call payoff * bs_model = Black Scholes Model
This theoretical P&L I plotted to a graph but instead of getting the smooth sigmoidal curve like the image above I getting a weird graph?
The above calculations are my own guess work of calculating theoretical P&L. Can any one share a good link which explains the calculation of theoretical payoff before expiry? I searched all the web and cant find any?