Sunday, September 27, 2015

Twitter Update #19 (Stock Purchase)

Sep 25

Analysis

TWTR came into some volatility today. I closed the hedges during the morning, before the market subsequently sold off. With the volatility coming back into this name, I have elected to hedge with a put spread (not a butterfly), which will give more immediate downside protection.  TWTR opened at 26.84 and closed at 25.29, down nearly 5%.

Trade

Trade 1 - Close existing put spread part of the butterfly

-2c Sep 25' 27.5 Put @ 0.70
+2c Sep 25' 26 put @ 0.08

As the stock continued to show weakness I closed the short put spread part of the butterfly to avoid getting assigned in case of a continued down move.

+2c Sep 25' 26 Put @ 0.10
+2c Sep 25' 24 Put @ 0.02
Net credit: 0.50/c

The short call was left to expire worthless
+2c Sep 25' 29 Call @ 0.00

Net P/L : 0.50/c - 0.10/c (cost of hedge from last week)

This brings in a total of $80 cash into the account to purchase shares

Trade 2 - New hedge

+2c Oct 2' 26.5 Put @ 0.60
-2c Oct 2' 25 Put @ 0.19
Net debit: 0.41/c

I did not sell a call to offset this trade yet as the market sold off. I will look to sell an option on Monday morning to offset the cost of this trade.

With today's roll of the hedges, a total of $152 in cash has been generated by the hedges over the last three weeks.

-End