Sunday, September 27, 2015

Twitter Update #20 (Stock Purchase)

Sep 28

Analysis

TWTR closed down 4.92% on the Friday expiration. This was a large move relative to recent price action. There does not appear to be any adverse news in the name and earnings is in late Oct.

With price in decline, the put spread purchased for 0.41/c from Friday looks like it can be sold for about 1.02/c at the open on Monday morning. This is 0.61/c profit over a couple of days. The maximum this spread can be sold for is 1.50pts

I will be placing an order to close this trade looking to make a total of $122 profit, which can be added to the $152 cash from the previous hedges this month, bring the cash total to $274.

From this I will enter an order purchase +10 shares of TWTR


I am going to re-hedge the position with a wider 2pt put spread and sell a closer call to finance. TWTR has been behaving weak and I want to provide more protection downside.

Trades

Trade 1 - Close existing hedges
-2c Oct 2' 26.5 Put @ 1.76
+2c Oct 2' 25 Put @ 0.74
Net Credit: 1.02/c

P/L for hedge: 0.61/c

Trade 2 - Purchase Stock

+10 shrs TWTR @ 24.98

Trade 3 - Purchase new hedges

-2c Oct 2' 25.5 Call @ 0.43
+2c Oct 2' 25 Put @ 0.80
-2c Oct 2' 23 Put @ 0.17
Net Debit: 0.20/c


-End