Long Collar – Free Trade Idea
There is an attractive long collar trade in Twitter (TWTR). Currently it is trading for $18.48.
There is a 61.3% chance the stock will close above 17.50 on 03-24-2017, and you will earn your target return of $237.95. There is a 68.0% chance the stock will close above 16.89 on 03-24-2017, and you will earn a profit. There is a 15.4% chance the stock will close below 15.00 on 03-24-2017, and you will have a total loss of $767.05.
For a Long Collar, the amount you risk is different than the amount of capital required. This is because you cannot lose all the capital invested in the position (this is a good thing). This long collar will require $6,757.10 and returns 3.5% on the capital invested.
This is a three legged strategy. To enter this position you will sell 4 call options expiring on 03-24-2017 with a 17.50 strike price, buy 4 put options expiring on 03-24-2017 with a 15.00 strike price and buy 400 shares of stock for 18.48. This will require a net debit of $16.86. The commission for this trade will be $15.10.
All information presented here is current as of February 8, 2017 12:58 pm (EST). All trading involves risk. Free trades ideas are presented for illustrative purposes only and are not to be construed as financial advice.
How Did We Do? The Results…
This trade employed a Long Collar strategy that needed TWTR to close above $16.89 on March 24, 2017 to earn a profit. The stock closed at $15.14. This trade had a net debit of $16.86 on 400 shares. Each share had a negative value of $1.72 resulting in a loss of $688.