Wednesday, August 19, 2015

Twitter Update #12

Aug 19

Analysis

TWTR has continued to drop this week coming off the gains from a couple of weeks ago. The stock is drifting lower and the hedge is gaining value. The maximum value of the hedge will be realized by Friday expiration if the stock can stay above or around 27 a share. Today it closed at 27.38.

With two days to expiration this hedge along with the short call has picked up substantial value. The hedge (butterfly + short call) was placed last week for a net debit of 0.04/c. It is now worth quite a bit more according to the table below.



The positional hedge value is the sum of all the leg P/L in the table: 
84 + 156 - 8 - 6 = 226

Having paid $4 for the hedge per contract, this makes the combined profit $218. There is also still a little more theta to take out of the position and bit more negative delta if the stock drops a little more. The value of hedge can be converted into 8 more TWTR shares at the current price.

I will looking to close this position either tomorrow or on Friday, hopefully purchase more stock and roll out a new weekly hedge. Note I will probably only close the short 30 call, the long 29 put and the short 27 put. The long 25 put will more than likely (barring something unexpected) have no bid to sell. It will be left to expire worthless.

Trades

No trades today

-End

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