Stock / Symbol: Twitter / TWTR
Strategy: Put Calendar Spread
Trade entry date / price: 04 Jan 2021 / $54.50
Trade exit date / price: 11 Jan 2021 / $47.00
Update: The exit order on our TWTR Put Calendar Spread filled today, 10 seconds after market open. In doing so, we captured a 42.9% return in just 6 trading days!
The setup. A review of the TWTR chart after market close on Dec 31st revealed an overbought situation with the stock reaching a new high days earlier, but failing to push higher. Technical analysis indicated a continued pullback, back down to its 50 day moving average at around $48.
On that premise, we entered into a 47 strike Put Calendar Spread on TWTR on Monday, January 4th. At the time of entry, the Greeks were approximately: -16.0 Delta, 1.2 Theta, and 6.3 Vega. The plan was to exit the trade with TWTR trading down at the $47 to $48 range. In the event the trade went against us, we had an upside stop at $56.12
Long 1 TWTR 19Mar21 47 put
Short 1 TWTR 15Jan21 47 put
This Put Calendar Spread was entered for a net debit of $2.30. Then, on Friday, Jan 8th, we submitted our Good Til Cancelled limit order for a net credit of $3.30 per contract.
Our standing (GTC order, limit order) exit order was filled at market open today for a credit of $3.31 per contract, with TWTR gapping down 8.5% from its previous close.
Max Risk: $235
Max Reward: $200 or 85% with TWTR at $47 on Jan 15th
Profit Range: TWTR between $42.45 and $52.85 on Jan 15th
Estimated Commission (round trip): $2.60
Upside Stop at: $56.12
Take profits at: $47 to $49
Realized Profit / Loss: $101 or 42.9% (pre commissions)