Monday, July 27, 2015

TWTR -- Update #4 (Sell Put)

JUL 27

Analysis

IVR: 83

TWTR reports earnings tomorrow on Jul 28 after the bell. TWTR is currently down to 34.04, dropping 1.39 this morning as the market is generally down. Implied volatility is rising in the stock and is probably near the maximum. After earnings, there will be IV crush across all options series.

I am long 102 shares of stocks and with hedges that expire this week.  The current butterfly hedge has the short the strike at 32.5 with downside protection to 30.

To take advantage of high IVR and add a possible position in TWTR, I am going to sell a high IVR ATM put collecting premium and if assigned take possession of another 100 shares of stock.

My breakeven on this stock lot would 32.70 on assignment. Expiration for this put is Jul 31', 5 days to expiration (DTE).

The hedges that expire this week are being held inflated by the rising IV. After earnings and as IV declines, the hedge will open up.

The expected move (EM) for this week with today's price move is 30.25 to 38 after having come down more than 2.40 in the past two days.  The stock is also near its all time lows after falling hard during last earnings.

Trade

-1/c Jul 31' 34 Put @ 2.29

Net credit 2.29

/END