TWTR Analysis

Twitter Inc. (TWTR)

Update 1/26/2018: TWTR’s Fisher Transform metric reversed to uptrending and, in line with my current guidelines, I exited immediately. The trend change puts TWTR’s trend at odds with a strong negative earnings surprise predictor from Zacks of -11%. 

Shares rose by 4.3% over one day, or a +1,569% annual rate. The options position produced a -30.4% loss for a -11,109% annual rate.

Seeking Alpha posted this take on the reversal: Twitter gains while analysts face COO departure.

In traditional chart analysis, TWTR’s decline was a fall from a double top, and double-top lore put support at $21.53. TWTR’s low before the the reversal took wind was $21.04, so it fell short of the mark by 51 cents.

I have entered a bear call vertical spread on TWTR, using options that trade for the last time 15 days hence, on Feb. 9. The premium is a $0.32 credit and the stock at the time of entry was priced at $22.33.

I made the decision to enter the trade in my account based on a negative earnings surprise predictor from Zacks of -11.0% and a downtrend from the Fisher Transform metric.

TWTR publishes earnings on Feb. 8 before the opening bell.

Implied volatility stands at 61%, which is 5.3 times the VIX, a measure of the volatility of the S&P 500 index.

TWTR’s IV stands in the 92nd percentile of both its annual range and its most recent broad movement.

The price used for analysis was $22.35.

Premium: $0.32 Expire OTM  
TWTR-bear call spread Strike Odds Delta
Long 24.00 70.5% 35
Break-even 22.68 65.5% 41
Short 23.00 60.5% 46

The premium is 64.0% of the width of the position’s wings.

The risk/reward ratio is 2.1:1.

The bid/ask spread was 9.4%.

By Tim Bovee, Portland, Oregon, Jan. 25, 2018


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.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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