Trade Update $PYPL: Closing Call Calendar for a Gain

by Dan October 16, 2015 1:57 pm • Trade Updates

Back on Sept 11th we expressed a bullish leaning trade in PayPal (PYPL). The calendar financed the purchase of longer dated with the sale of ones expiring today (here). To refresh, here was the trade:

Trade: PYPL ($32.70) Buy Oct / Jan 35 Call Calendar for $1.25

-Sell to open 1 Oct 35 call at .95

-Buy to open 1 Jan16 35 call for 2.20

Now with the stock at $34.30, up about 5%, we have a decision to make with the short leg of the put calendar set to expire worthless on today’s close, leaving us long the Jan 35 call.  The way we see it we have the following choices.

  1. Stay long the Jan call and look to sell or spread if and when the stock moves higher.
  2. Close the trade by selling the Jan 35 call for an approximate $1.10 gain
  3. Sell an out of the money Nov or Jan call and make a vertical call spread.

At this point with earnings expected on Oct 28th we think it makes sense to book the profit, but keep a close eye on the story with a possible long entry back closer to $30.  Our bullish thesis has not changed.

Action: Sell to close PYPL ($34.30) Oct/Jan 35 call spread at $2.34 for a 1.09 gain.

-Buy to close 1 Oct 35 call for .01

-Sell to close 1 Jan 35 call at 2.35