OSTK Vertical Call Spread – Trade Recap

Stock / Symbol: Overstock / OSTK
Strategy: Vertical Call Spread
Trade entry date / price: 06 Apr 2021 / $66.90
Trade exit date / price: 30 Apr 2021 / $80.90

Entry Reasoning: Technically, OSTK was demonstrating long term support at its 200 day moving average.

On the premise that OSTK would remain above $35 longer term, I entered into an ITM Vertical Call spread on OSTK, structured to allow for a 48% pullback of the stock and still be profitable.

OSTK Vertical Call Spread structure details:
Long 1 OSTK 17Sep21 30 call
Short 1 OSTK 17Sep21 35 call
for a net debit of $4.05 per contract.

At the time of entry into the position, the Greeks were approximately: 3.5 Delta, 0.7 Theta, and -2.3 Vega. The structuring of the position provided for a profitability range of at/over $34.10 by the expiration of the long/short calls. The plan was to attempt to exit the position early with OSTK trading in the $75 to $85 range.

Exit Reasoning: On Apr 30th, I entered an exit order to attempt to exit the trade early, with about a 15% return. Although I didn't expect the order to fill for at lease a few weeks, it filled that same day at 9:46am PST.

Trade Exit Order:
STC 1 OSTK 17Sep21 30 call
BTC 1 OSTK 17Sep21 35 call
For a net credit of $4.65 per contract .

Analysis:

Max Risk: $405
Max Reward: $95 or 23% with OSTK at/over $35 on Sep 17th
Profit Range: OSTK at/over $34.10 at market close on Sep 17th
Commission (round trip): $2.60
Downside Stop at: $35
Realized Profit / Loss: $60 or 14.8% (pre commission)

Positive Theta

Leave a Reply

Your email address will not be published.