TWTR Short Call

[spurge0n]

I might be a little early to the party here, but it's a risk I'm willing to take.

 

TWTR shares are tanking after earnings. So I'm opening a vertical bear call spread.

 

Sold the $45 call and bought the 47.50 call as a hedge for this Friday's expiration.

 

Total credit of .17.

 

Also, the market has been on an almost unstoppable run-up for quite some time. I think it has to take a breather eventually.

 

Finally, the Fed's meeting minutes might spook investors into selling, especially if there's language indicating that interest rates might go up soon. I can see that happening with the price of oil collapsing.

 

Lots of "ifs", but that's why it's called risk.

[spurge0n]

Nope. I think there's some institutional buying going on here. I closed out the short call for a loss of $40/contract.

 

However, I am keeping the long call open for a while.

[spurge0n]

So, in retrospect, I did everything I could possibly do wrong with this trade:

 

1. I got in when the stock was near its low for the day.

2. I got spooked when the position moved against me unexpectedly.

3. I closed the short call when the stock was near its high for the day, maximizing my loss.

4. I didn't even give the position a day's worth of theta gains.

5. I held the long call hoping that the run-up would continue - it didn't.

6. I didn't believe in my initial assessment.

[Optrader]

Another wrong to add to list.

When selling credit spreads, never let the loss grow more than the max twice the credit amount . So your stop should have been .34  instead of .40

 

Another idea is why not sell iron condor , so that you have more staying power than just one credit spread ? But that would open up to lot of discussions.

 

I typically avoid selling credit spreads or condors , but that is another high probability game with low reward.