Options Play for Twitter Inc (TWTR) Ahead of Earnings

The U.S. Markets and asset classes the world over are seeing a low volatility phase. Even though the earnings and forward guidance in this result season has been pretty good and we have seen a good amount of Mergers and acquisitions happening, the option market has been lying low. All that could change this week with the U.S. GDP data, Fed meeting and jobs data on Friday.

Jim Strugger, derivatives strategist at MKM Holdings discussed the low volatile phase in the U.S. Equities market and his options strategy for playing Twitter Inc (NYSE:TWTR) ahead of the company releasing its earnings tomorrow, with Olivia Sterns on Bloomberg’s ‘Market Makers’.

“[...] it is the summer doldrums for sure, but certainly among professional investors they are looking to capture the sort of convexy that comes with Trulia, stock that goes up very sharply over a short period of time and you get that with options. So, again, if we revert back to sort of 06, 07, 08 when there was a lot more activity in the last cycle when M&A was this active, I would expect to see activity pick up,” Strugger said.

500px-Twitter_Logo_Blue.svg

Mr. Strugger is of the view that with the kind of volatility levels being witnesses, investors must start putting up hedges. He considers hedges as a price one has to pay to stay in this market. On Twitter Inc (NYSE:TWTR), Strugger suggested that although he likes the company, he is cautious from a short-term perspective as the metric that people care about from the company is its monthly active users and according to third party data, it might be a little light.

“[...] What we are going to do is we are going to hedge long positions, the way we are going to do that is just use weekly options. Implied volatility is high enough that we are able to do that and create sort of light band round long stock position. We can come in, we can sell 43 strike calls that expire this Friday, buy 33 and half strike put,” Strugger added.

Disclosure: None

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!