feat: Simple script to view calendar spread payoff diagram

calendar-spread-payoff-diagram.py

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+#!/usr/bin/env -S uv run --quiet --script
+# /// script
+# dependencies = [
+#   "pandas",
+#   "matplotlib",
+#   "numpy",
+#   "seaborn",
+#   "yfinance",
+#   "mibian",
+#   "scipy",
+#   "persistent-cache@git+https://github.com/namuan/persistent-cache"
+# ]
+# ///
+# Data manipulation
+# Copied from https://blog.quantinsti.com/calendar-spread-options-trading-strategy/
+
+# To plot
+import matplotlib.pyplot as plt
+
+# BS Model
+import mibian
+import numpy as np
+import pandas as pd
+
+# Nifty futures price
+nifty_jul_fut = 11030.50
+nifty_aug_fut = 11046.40
+
+strike_price = 11000
+jul_call_price = 85.20
+aug_call_price = 201.70
+setup_cost = aug_call_price - jul_call_price
+
+# Today's date is 20 July 2018. Therefore, days to July expiry is 7 days and days to August expiry is 41 days.
+days_to_expiry_jul_call = 7
+days_to_expiry_aug_call = 41
+
+# Range of values for Nifty
+sT = np.arange(0.92 * nifty_jul_fut, 1.1 * nifty_aug_fut, 1)
+
+# interest rate for input to Black-Scholes model
+interest_rate = 0.0
+
+# Front-month IV
+jul_call_iv = mibian.BS(
+    [nifty_jul_fut, strike_price, interest_rate, days_to_expiry_jul_call],
+    callPrice=jul_call_price,
+).impliedVolatility
+print("Front Month IV %.2f" % jul_call_iv, "%")
+
+# Back-month IV
+aug_call_iv = mibian.BS(
+    [nifty_aug_fut, strike_price, interest_rate, days_to_expiry_aug_call],
+    callPrice=aug_call_price,
+).impliedVolatility
+print("Back Month IV %.2f" % aug_call_iv, "%")
+
+# Changing days to expiry to a day before the front-month expiry
+days_to_expiry_jul_call = 0.001
+days_to_expiry_aug_call = 41 - days_to_expiry_jul_call
+
+df = pd.DataFrame()
+df["nifty_price"] = sT
+df["jul_call_price"] = np.nan
+df["aug_call_price"] = np.nan
+
+# Calculating call price for different possible values of Nifty
+for i in range(0, len(df)):
+    df.loc[i, "jul_call_price"] = mibian.BS(
+        [
+            df.iloc[i]["nifty_price"],
+            strike_price,
+            interest_rate,
+            days_to_expiry_jul_call,
+        ],
+        volatility=jul_call_iv,
+    ).callPrice
+
+    # Since, interest rate is considered 0%, 35 is added to the nifty price to get the Nifty August futures price.
+    df.loc[i, "aug_call_price"] = mibian.BS(
+        [
+            df.iloc[i]["nifty_price"] + 35,
+            strike_price,
+            interest_rate,
+            days_to_expiry_aug_call,
+        ],
+        volatility=aug_call_iv,
+    ).callPrice
+df.head()
+
+df["payoff"] = df.aug_call_price - df.jul_call_price - setup_cost
+plt.figure(figsize=(10, 5))
+plt.ylabel("payoff")
+plt.xlabel("Nifty Price")
+plt.plot(sT, df.payoff)
+plt.show()