Wednesday, October 07, 2015

Twitter Update #25 (Upside Adjustment)

Oct 7

Analysis

TWTR closed up the day +1.48pts (close - open). This is a relatively large move again and I will be adjusting the hedges tomorow morning to capture this move upwards.

TWTR closing price today is at 29.83

I will be willing to spend up to 0.37/c to pay for the new hedges. Also, on the previous move, I only spent about 0.09/c for the hedge, when I had up to 0.30/c to spend. In total, I can spend about 0.59/c by sticking to the 25% rule of paying for the cost of the hedge.

Let look at some possible options

Trades

Part 1 - Roll out short call 2 weeks in time, and 2pts in price
+2c Oct 30' 28 Call @ 3.06
-2c Nov 15' 30 Call @ 2.52
Net Debit: +0.54/c

Part 2 - Roll up and out butterfly hedge 2 weeks in time
Sell Old Hedge
-2 Oct 30' 24 Put @ 0.48
+4 Oct 30' 26 Put @ 0.88
-2 Oct 30' 28 Put @ 1.53
Net Credit: -0.21

Buy New Hedge
+2 Nov 15' 25.5 Put @ 0.98
-4 Nov 15' 27.5 Put @ 1.58
+2 Nov 15' 29.5 Put @ 2.45
Net Debit: +0.27

Total cost of new hedges: 0.60/c

By increasing the roll of the short call to the 30 strike and paying a little more I can get a higher profit potential. I am willing to pay a little more aggressive to get this account closer to positive.