Yesterday we previewed Visa (V) earnings and detailed a mildly bullish spread, looking for the stock to go higher, but find some resistance at 100. Following the report the stock did just that, now trading at $100. First, let’s look back at the trade idea, from yesterday:
V (98.50) Buy the July/Sept 100 call calendar for 1.25
- Sell 1 July 100 call at .80
- Buy 1 Sept 100 call for 2.05
This is exactly what you want to see on an earnings calendar. With the stock 100 the July 100 calls (expiring today) have declined in value, now trading .30 (vs the .80 sale price) while the September calls are worth more at 2.40 (vs the 2.05 purchase price).
As far as trade management, the most that this can be worth today is about 2.40, that would happen if the stock closed at 100, with the July calls expiring worthless and the Sept calls worth about 2.40.
But with the stock right near strike and a nice win already, for those that were just in it for the event it makes sense to close the trade now for a profit and not take any risk for the rest of the day of the stock moving away from strike.
ACTION – Sold to close the V July/Sept 100 call calendar at 2.10
For those looking to stay in the name for higher highs, it may make sense to roll the July calls out to September, perhaps to the Sept 105 calls, that wouldn’t book any profits but would leave a very cheap 100/105 call spread.