OK, just because I don't like the adjustments to our existing TWTR trade, doesn't mean we can't look at new ones.
I've long thought $20 was a fair price and that means I think we can look at a conservative play on them:
- Sell 5 2018 $20 puts for $3.50 ($1,750)
- Buy 10 2018 $15 calls for $8.40 ($8,400)
- Sell 10 Jan $21 calls for $2.10 ($2,100)
That's net $4,550 on the $6,000 spread so it will not be great if they quickly get bought out but still +$1,450 (32%) with no hassle if they do. If there is no definite deal by Jan and the short $21s go worthless, you get to sell another $2,000 worth of calls in April and drop the basis to $2,500ish - that starts getting very interesting. If TWTR does take a dive, you can roll the puts and sell some more and roll down the calls and sell more calls - lots and lots of ways to get more money and be flexible.
