To update the trade ideas from this past weekend on Twitter Stock, this morning the overall weakness in stocks also hit Twitter hard. The stock opened at $64.83 and hit an intraday low of $63.50 by 9:50. Two trade ideas I had discussed on the weekend are perhaps of interest now that the stock has been so volatile again today. The chart below shows the stock around 12:00. It has to fall to around $60 to hit the Middle Bollinger Band at this point so the stock remains somewhat bullish for short-term weekly trades.
Twitter Stock Fast Stochastic
I added the Fast Stochastic but changed the period for K from 14 to 10 to give a more focused period to look at. You can see therefore a sell signal formed this morning based on Friday’s close.
Twitter Stock Momentum
I did the same thing with the Momentum indicator changing the period to 10 to give a more detail and shorter time frame since Twitter really has not been trading long enough to give decent historical information. You can see that the sell recommendation from Dec 27 did take the “wind out of the sails” of the Twitter stock rise. Momentum though still positive looks like it may trend sideways which could be perfect for short-term trades against the weekly options.
Twitter Stock Naked Puts
Among the trade ideas discussed was selling naked puts at the $55 strike which has about the only support next to $39. The Twitter stock puts for Jan 10 2014 expiry at the $55 strike are shown below as of noon. Puts have traded from 15 cents to 50 cents.
A number of investors wrote me this morning and sold naked puts at the $55 strike earning from .40 cents to one investor earning 50 cents which so far (around noon) is the high for the day. They are wondering if they should close early? I have already replied directly to them that I see no reason not to consider closing when the trade has returned 50% in less than half a day. This also opens up the possibility of more trades later in the day or looking at the above chart, during the rest of this week. While I am not a financial planner and nothing you read is recommendations or advice, if this was my trade I would take the profits and look for the next big dip either later today or over the upcoming days. That is how I would trade this position which is why in my article I discussed increasing the size of the put contracts under the heading “Selling Large Quantities – Closing Early”, within that article. You can review the entire article here.
Opportunities In Twitter Stock
For the more aggressive trader there are substantial opportunities within Twitter stock. For example the $51 for Jan 24 is sitting at a bid of 70 cents and an ask of 90 cents. This certainly does look appealing consider that if the stock even trends sideways at the $57.00 level, should it get the low this week, these premiums have to evaporate quickly over the following week.
Even the $48 put strike has potential with the Jan 24 2014 expiry showing a bid of 35 and ask of 55 cents but moving into Feb 22 expiry the amount jumps substantially to $2.05 bid and $2.15 ask. Finally for the most aggressive investors the June has to be compelling for the $48 put strike returns 11.6% and would place the investor into the stock at $42.40 which is about 8% above the $39 support level.
Twitter Stock Trade Ideas Summary
I am not advocating any of these trades but simply find them interesting examples of the potential opportunities for those investors who are more aggressive than investors such as myself who tend to be more conservative in our trading. If I was doing any of these trades I would still be staying with the weeklies and looking to pick up perhaps half a percent on a weekly trade. Half a percent a week is still 26% a year. Remember, you always trade at your own risk.