Twitter Inc (NYSE:TWTR) had a fluctuating stock trend since its IPO during the end of 2013. Twitter Inc (NYSE:TWTR) stock reached its all-time high as soon as the company went public and traded at $69 per stock during the beginning of 2014. But dropped more than 50% of its value and went as low as $30.5 per stock during May 2014. It had broken the $50 mark on the upside twice and $40 mark on the downside twice since its low in May 2014. Twitter Inc (NYSE:TWTR) reported its earnings report on Tuesday, which resulted in a handful of unhappy investors and shareholdes and the stock dropped nearly 20% of its value post the earnings report. But many traders including Dan Nathan expected the Twitter Inc (NYSE:TWTR) stock to experience an upside post its earnings and had the options play ready to cash in on the upside movement. Nathan talked on CNBC about what he would do post this disappointing quarter results from Twitter and huge downside movement in the stock.
Dan Nathan talked a week earlier about his options play on Twitter stock to cash in on the upside movement on the Twitter post its earnings report, which was reported on Tuesday by the social media company. Nathan said during this interview that he was actually longing Twitter stock since it was trading at high $30’s and he also shared his options play to cash in on the upside movement of the stock. His options action was a May 52-60 Call spread, which has significant profits for upside movement of Twitter stock from $54 to $60. But on the contrary this trade also has losses below $52. But this expectation from Nathan proved wrong and the stock took a nose dive due to a poor 2015 full year guidance reported by the company.
So what did Nathan do after this disastrous earnings report and nose dive from Twitter? He said that he was going to wait for the stock to move as low as $35.
“I did do the stock replacement trade so I defined my risk. I bought the 52 – 60 Call spread in May and I was really worried about the potential for them to kind of hit what I though was pretty high expectations. That being said I do believe in the long term story. So I just really wanted to kind of define my risk. So here I am. I am actually back buying the stock down here. I started at $42, I am still buying a little bit here and if the stock goes down to $35, that’s where I think its probably going to sell a lot. Soon I may consider a longer dated risk reversal selling may be a September 30 Put to buy a September 40 Calls,” Nathan.
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