Around midday on Thursday, a block of 3,551 contracts traded at the bid price of $0.07 at the Twitter Inc weekly 8/22 46-strike call. Simultaneously, a matching block of 3,551 contracts crossed at the ask price of $0.04 at the weekly 8/22 46.50-strike call. Open interest at both strikes rose overnight by just over 3,500 contracts, indicating these were newly initiated positions. Since the speculator apparently sold the 46-strike calls and bought the 46.50-strike calls, this appears to be a very short-term bear call spread on TWTR.
Essentially, this speculator is looking for TWTR to remain at or below $46 per share today. However, if the stock should rally, the purchased calls at the higher strike effectively limit the upside risk, relative to a naked short call strategy. In this specific scenario, the trader pocketed a net credit of $0.03 per spread, for a total upfront premium of $10,653 (net credit of $0.03 x 100 shares per contract x 3,551 spreads traded). This amount is the maximum potential reward on the play, should TWTR remain beneath $46 through tonight's close -- when these weekly options are set to expire.
Meanwhile, the potential risk is fairly steep. If TWTR should rally to $46.50 or beyond, the trader is looking at a maximum possible loss of $166,897 [($0.50 difference between strikes less $0.03 net credit) x 100 shares per contract x 3,551 spreads traded].
So far, this neutral-to-bearish spread strategy is paying off. Twitter Inc (NYSE:TWTR) is fractionally lower at $45.04 this morning, and the stock has spent the entire month of August pinned below the $45.50 level.作者: 我想飞 时间: 2014-8-24 15:36
