Tuesday, August 04, 2015

TWTR Update #7

Aug 3

Analysis

TWTR just keeps on moving - unfortunately downward. This is presenting two problems which needs to be dealt with. The size of the moves is challenging the butterfly strikes. Fortunately, I have on a weekly expiration so the butterfly is opening up quickly due to theta decay, but the price movement is challenging the short strikes.

The second problem, is that the position is down money because there has been no bullish bounce as of yet, so the long stock position has been unable to gain any value.

TWTR closed today at 29.17, just above the short strike for this weeks butterfly. 

I have done two aggressive hedging moves in thinking that weakness in TWTR remaings : roll down the short call to just above the put strikes. Purchase another butterfly for protection in this weeks expiration just incase TWTR continues to fall.

Trades

Roll down call
+1/c Aug 7' 33 Call @ 0.10
-2/c Aug 7' 31.5 Call @ 0.15
Net credit 0.20

This has two short calls against the the long stock position of 200 shares with Friday expiration.

Purchase 2 contracts of butterfly for protection
+1/c Aug 7' 29.5 Put
-2/c Aug 7' 27.5 Put
+1/c Aug 7' 25.5 Put
Net Debit of 0.55/c

I did not close the existing hedge as of yet, thinking that is the stock can stall for another day or two, I will collect more time premium on the original hedge which is currently in the money.


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