Buying A Call Option On Twitter $TWTR

| May 22, 2015 | 0 Comments

Buying A Call Option On Twitter $TWTR                                       

Social media stocks have always been a lightning rod for investor debates. Some people love them, others won’t touch them (or flat out short them). New industries and business models often tend to act as battlegrounds for investors.

But social media has been particularly contentious. Social media companies are so popular – and it’s impossible to deny their appeal. Yet, the revenue/profit models for these companies are still works in progress.

And no social media is more in flux these days than Twitter $TWTR.

$TWTR, of course, is the ultra-popular micro-blogging site. Tens of millions of people use Twitter on a daily (or even hourly) basis. It’s a major source of news, information, and social exchanges.

As of this writing, $TWTR was trading at $37.65. That’s 33% from the 52-week high and 24% from the 52-week low. The stock has had a rough month (down 26%), but is still up 5% for the year.

So is now the time to buy a call option on $TWTR?

As a reminder, a call option makes money when the underlying stock goes up. Is $TWTR getting ready to rebound?

For a more in-depth look at the popular social media site, you can click the link.

Here’s the deal…

Shares in Twitter took a huge hit recently after the company missed earnings in a big way. The company is simply not monetizing its massive user base effectively enough. And, projected ad revenues for the year fell significantly below analysts’ expectations.

However, $TWTR isn’t the type of company you can just ignore or write off. It’s extremely popular and useful. There’s a reason why the service has over 200 million monthly active users.

Here’s the chart of $TWTR:

call option buying opportunity, a chart of $TWTR

As you can see above, the stock plunged below the 50-day moving average after badly missing earnings. It’s basically been flat since then. The share price would need to jump $10 just reach the moving average.

Now could be a great time to buy a $TWTR call option

Yes, $TWTR is in trouble in the short-term, but I don’t believe the company’s long-term future is in question. If current management can’t figure out how to monetize the user base, then someone new will come in who can.

That’s why I believe buying a longer-term $TWTR call is in order. The January 2016 40 calls are trading around $4.25. That’s a not cheap, but not overly expensive for a call with that much time value. And, it’s less than $3 out of the money.

Yours in Profit,

Gordon Lewis
Options Trading Research

Note: Gordon Lewis has been trading options for more than 15 years and he now writes and edits for You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Options Trading

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

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