On Feb 10, we initiated a Feb/Mar Calendar Spread Trade on FOSL. Since today was Feb expiration day, I thought it would be worthwhile to analyze how we did on that trade.
First of all, we were right about the direction of the move but underestimated its magnitude (our estimate was ~ 10%). FOSL rallied ~ 20% post earnings on Feb 14.
Our trade was still profitable. FOSL closed today at 118.19. Thus the call we were short was worth 8.19 at today’s close. The Mar 2012 110-strike call we were long was worth 10.30 at today’s close. The difference (10.30-8.19) = 2.11 is higher than our original debit (1.40), leaving us with a profit of (2.11-1.40) = 0.71 minus commissions. Thus, even though we were wrong about the magnitude of the move, we still made ~ 50% profit in 7 days.
(I am assuming we all closed our Mar 2012 110-strike long call position)