Ok. I’ve learned and continue to learn a lot about options, and more recently, the benefits of option spreads.
I wanted to get my feet wet, so I bought my first spread today. Bought a 70 call for TWLO and sold a 75 call as well, creating my current spread (expires Friday). I bought this today when TWLO was at ~63, and after their ER today, the stock price is currently at ~73.
I’m aware that this type of spread eliminates or drastically reduces time decay as the thetas combine (sold option is negative theta while the bought option is positive, both kind of cancelling each other). I also am aware to prepare for some IV crush post-ER, but with a 15% gain AH, the damage should be minimal in comparison to the gains.
Now for the part where I’m curious; I checked my potential profits at http://www.optionsprofitcalculator.com (https://imgur.com/a/HHTI5gj) and noticed that if the price stays at 73 for the week, I actually GAIN more money per day while the underlying stays the same. I’m confused as to how this happens and have been racking my brain looking for the answer.
I want to sell my spread tomorrow for some quick gains, but am debating whether to hold a few more days for more potential profit. While the calculator shows that I’ll make more money holding through the week, I’m unsure why or how that’ll happen and also am unsure when to sell for the best profit.
TLDR; how can a vertical call spread gain value as the underlying stays the same?
Thanks.
Submitted August 07, 2018 at 12:53AM by RobRex7 https://ift.tt/2KuWCbK
