Trade Update – Closing $UAL Diagonal Put Calendar for a Wash

by CC October 16, 2015 3:23 pm • Commentary

On September 24th we made a bearish bet in UAL by using a diagonal put calendar. The intention was to own more short deltas than a typical calendar (like the PYPL trade we just closed.) In the case of UAL we wanted to own near the money puts that caught earnings, but finance them with a lower strike that expired before earnings. Here was the trade:

Trade: UAL ($56.40) Buy the Oct 52.5/ Nov 55 put diagonal calendar for $2.25
  • Sell 1 Oct 52.5 put at .80
  • Buy 1 Nov 55 put for 3.05

Since initiating the stock sold off hard back to support at $50, but has since recovered to the point that it was a loser the past few days:

[caption id="attachment_57745" align="aligncenter" width="621"]Screen Shot 2015-10-16 at 12.15.43 PM 3 month UAL from LiveVol Pro[/caption]


The stock is down today on unfortunate news that new CEO Oscar Munoz had to check in to the hospital last night with what might have been a heart attack. Hopefully all is fine, but investors didn’t take the news well.

As far as the trade, we face a similar decision we had with PYPL in that the front month of the calendar expires today. We could roll that put and create a vertical spread in November or we can simply close for a tiny profit. We had a good chance to make money with this before the recent rally and frankly managed it poorly.  We’ll take our medicine here and close on today’s weakness.

Action – Sold to close the UAL ($55.90) Oct 52.5/Nov 55 diagonal put calendar at 2.34 (9c profit)
  • bought to close 1 Oct 52.5 put for .01
  • sold to close 1 Nov 55 put at 2.35