Having played the short-form social media company's earnings in July, I'm considering taking another bite of Twitter Inc. (TWTR), headquartered in San Francisco, California, based on its high implied volatility.
[TWTR in Wikipedia]
I shall use the OCT series of options, which trades for the last time 35 days hence, on Oct 16.
Click on chart to enlarge.
|TWTR at 12:30 p.m. New York time, 90 days 2-hour bars|
|Week||SD1 68.2%||SD2 95%||Chart||Earns|
short the $22 puts and long the $20 puts,
sold for a credit and expiring Oct. 17.
Probability of expiring out-of-the-money
The premium is $0.39, which is one fifth of the width of the position’s wings. The stock at the time of purchase was priced at $27.26.
The risk/reward ratio is 4.1:1.
The zone of profit in the proposed trade covers a $5 move either way, which is 3.8 times the average true range.
Decision for My Account
I've opened a position in TWTR as described above.
-- Tim Bovee, Portland, Oregon, Sept. 11, 2015
My volatility trading rules can be read here.
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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
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