Sunday, November 08, 2015

Twitter Update #28

Nov 6

Analysis

TWTR volatility has dropped and is the bottom 10-12 percent on a 52 week basis. Options are cheap on a IVR (implied volatility rank) bases. Price has coming in since earnings and closed at 28.28.

With 14d to expiration on the current hedge, time decay is becoming more significant. The stock is trading just above the center strike of the butterfly and so is in the range of the maximum value for the hedge.

Overall the position is still down a net of -$1000 but it slowly coming back. TWTR is a stock that moves a bit then does nothing overall. It may very well be a much long term play.

A few things to watch:

0) Hedge Price - TWTR was last hedged at 31.15. The price will need to be above this before hedges can adjusted upwards.

1) Short calls - the time value is fast coming out of these calls. They are trading for 0.16-0.19 and looks to soon be even less. If they get really low <0.05, they should be closed with a GTC order.

2) Butterfly - The net cost basis on the 30-28-26 butterfly was 0.27/c. It is now beginning to open up and trading for 0.61/c. The maximum value of the butterfly is the width of the put spread (2pts). This is the portion of the hedge that will be recovering cash into the account that can be used to purchase more stock.

The total cost of carrying this hedge is 0.43/c (cost of rolling up the calls + cost of rolling the butterfly).

Trades

No trades

-End