Twitter, Inc. (TWTR) is a San Francisco based social media and networking platform that allows users to post and exchange short messages in real-time. At the time of this writing, TWTR is currently trading at 42.06, up 3.29% on the day. The stock opened with a large gap up today on news that Google will now be including relevant Twitter “tweets” in the results yielded by its ubiquitous search engine. This potential increased visibility for Twitter was met with a largely bullish reaction, though the stock is currently trading off the intraday highs just under 42.50. On a daily chart, TWTR is trading within the lower-middle portion of its 52 week range of 29.51-58.98. The stock has been range-bound for the last several months, but that could be changing in short order with today’s gap higher and fourth quarter earnings scheduled for after the closing bell today, 2/5/2015.
TWTR has sold off on earnings day 3 of the past 4 quarters with an average move of 15.6%. Currently the options market is implying a move in TWTR of about $5.00 by tomorrow’s close. That would give us a downside target around $36.50 by the bell tomorrow. With TWTR showing weak historical earnings performance and the stock trading inside the cloud I will be looking to get short TWTR ahead of earnings.
Potential Trade: Buying the TWTR Feb 6th Weekly 38-36 Put Spreads for $0.50
Risk: $50 per 1 lot
Reward: $150 per 1 lot