Buying A Call Option On Twitter $TWTR
Buying 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:
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.
Category: Call Or Put Options?
