Twitter shares are getting dangerously close to their 52-week low of 21.01, and many are asking “where’s the short squeeze?”
This stock could go to $12, I mean it. We only get 13 strike puts for now, and the Jan 2017 Leaps (13 strike) don’t look terrible at $1.00-$1.09. I also think we see a dip below $17 before April expiration.
I like Twitter as a user, but I liked GRPN as a user too – maybe once a year. Perhaps more importantly, I didn’t like GRPN as a business user. I never tried TWTR as a business user. I think that speaks volumes in and of itself, seeing as business users are how Twitter gets actual revenue, but that’s another story.
There’s no sign of any ebb in the bleeding, at least not until it gets cheap enough for someone who isn’t Apple to buy. The further AAPL falls, the greater the likelihood of a twitter acquisition.
One might say I’m not a fan of this stock (although I was long shares outright for a very long time in an investment portfolio). But with the shortened trading week and the big downside move seen yesterday, I like selling volatility in TWTR. The implied move in this week’s weekly at-the-money straddle is 0.89, just a hair over 4 percent. Sell volatility.
It is a short holiday week with higher theta options, and volatility is even higher in an allegedly ‘oversold’ stock such as TWTR.
Trade: Sell the TWTR Dec Weekly 21.5-22.5 Bear Call Spread for $0.56
Risk: $44 per 1 Lot
Reward: $56 per 1 Lot
Break-even share price at expiration $21.94
John Voorheis is the Chief Strategy Officer and Co-Founder at AlphaShark Trading. He will be leaving his role in January 2016 to fully focus on offering market commentary while seeking buy-side trading roles. You can follow him on Twitter @johnvoorheis or reach him via email jlvoorheis2@gmail.com.
