Buying A Call Option On Twitter $TWTR

| April 8, 2015 | 0 Comments

TWTRBuying A Call Option On Twitter $TWTR

Social media can be a hard industry to gauge when it comes to making investing decisions.  The companies are relatively new.  And, they use what we tend to consider as non-traditional business models.

Moreover, there’s still a lot of consolidation going on in the space.  It’s uncertain who the big players are going to be in five or ten years.

So what’s that mean for a company like Twitter $TWTR?

Twitter, of course, is the ultra popular micro-blogging site.  For younger people, the site/mobile app is more of a social tool. However, it’s a very important news and information source as well (for all ages).

I use Twitter throughout the day for financial news.  And, at night, I rely on it for sports updates and other breaking news.   There are several people just like me actively using the site/app, which is why the company generates about $1.4 billion in primarily ad revenues.

Currently, $TWTR is trading at $53.03, up 42% on the year.  That’s 80% from the 52-week low of $29.51, and just 5% from the 52-week high of $55.99.

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 headed to new highs?

For a more in-depth look at TWTR, you can check here.

Here’s the deal…

Twitter shares have been on the move lately for a couple of big reasons.  First off, the company introduced Periscope, a live-streaming video product which is taking the world by storm.

Like other social media products, if Twitter can monetize Periscope properly, it could provide a huge boost to revenues.  The company has even reached an agreement with MLB so live-streams from baseball games can be broadcast on the site.

Perhaps more importantly, TWTR has been the subject of several buyout rumors.  The company makes a near ideal acquisition target for bigger Internet players (such as Google $GOOGL).

Clearly, buyout rumors are going to be bullish for the stock price.

Here’s the chart of $TWTR:

call option buying opportunity, a chart of $TWTR

As you can see above, the stock has been on a tear lately. The big up moves this year are due to better than expected earnings, new products, and buyout rumors.  The 50-day moving average has taken a sharp turn upwards as the share price continues to climb.

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

I believe the company is a legit acquisition target.  It may not happen anytime soon, but there’s a good chance $TWTR is acquired.  If not, management may try to acquire other players in the space in order to ensure its independence.  Either way, it’s good for shareholders.

As such, buying a long-term call is in order.  The January 60 calls are trading around $5.  That’s a lot to pay in premium, but easily reachable for a stock with as much upside as $TWTR has.  Not to mention, you get about nine months for the trade to play out.

Yours in Profit,

Gordon Lewis

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  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: Call Or Put Options?

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.

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