[Closing EBAY Spread]
Dear Member:
As you may know, EBAY announced surprisingly good earnings yesterday afternoon. After analysts' reviews, the stock is down this morning. My calendar spread is profitable at the moment so I am going to close it. Before setting out my order, I should mention I have several options (no pun intended) with this play, a few of which follow: 1.Close the whole trade at a small profit; 2.Let the short Oct 40 calls expire worthless on Friday (if stock stays below $40) and hold the Jan 40 calls in the belief that the stock price will go up; 3. Hold the Jan 40 long call position and roll the Oct 40 calls to the Nov 40 calls for a net credit of about 70 cents (and plan to repeat in December).
Any of those options seems quite viable. I have chosen #1 to take a quick profit and look for what appear to be some stronger opportunities.
I am placing an order to close my calendar spread by simultaneously buying to close the Oct 40 calls (XBAJH) and selling to close the Jan 40 calls (XBAAH) at a credit limit of $1.75. If I am not filled at this credit, I am able to fall back on the other alternatives.
DISCLOSURE: At the time of publication, I am short the Oct 40 calls and long the Jan 40 calls on EBAY.
Sincerely,
Bill Kraft
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