TWTR is trading $51.33, down 22.2% with IV30™ down 29.0%. The Symbol Summary is included below.
Provided by Livevol
This is a follow-up / post-mortem of TWTR earnings and the preview posts preceding it. You can read the two articles I wrote just ahead of earnings, below:
2-4-2014: Twitter (TWTR) - Earnings Preview: Why is The Option Market Reflecting Lower Risk? Did You Know This... Again?...
2-2-2014: Twitter (TWTR) - Earnings Preview: Two Things I Didn't Know. Do You?
The main point in the prior posts was simple:
---
"I've been banging the drum about how low the volatility has been in the option market and have written in great detail surrounding TWTR, AAPL, NFLX, FURX, NAV and others. At some point, the option market will prove right, and I in fact will prove dead wrong. It's gonna happen...
But, right now, it's difficult for me to understand how the IV30™ hasn't moved (or even how it's gone down) into earnings.
Maybe all the news is out?
Maybe there are no more surprises?
Maybe this is absolutely correct
... but maybe it isn't.
Disclosure: I hold a position in TWTR."
---
The bottom line is that the IV30™ didn't rise into earnings, it stayed curiously flat-lined and that was very, very ... very weird. Here's that volatility chart from Tuesday:
Provided by Livevol
It's that flat-line that had me thinking "mispricing" in the option market. And yeah, it was mis-priced.
Here's how TWTR looked on Tuesday (the date of the final pre-earnings post):
Provided by Livevol
And the option market:
The $65 strike straddle in the Feb 7 weeklies: $9.80.
The $65 strike straddle in the Feb 21 monthly: $11.20.
And finally, today:
Provided by Livevol
The $65 strike straddle in the Feb 7 weeklies: $9.80 ---> $13.70 (parity) (40% change)
The $65 strike straddle in the Feb 21 monthly: $11.20 ---> $14.10 (26% change)
I actually think TWTR stock is getting held up right now b/c of the market uptrend. Given the user growth news, I would have expected TWTR to be down in the $45 range today. If it can't grow users, the growth story means nothing, regardless of greater revenue per advertisement.
This is trade analysis, not a recommendation.
Follow @OphirGottlieb
Tweet
Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.
The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.
I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.
I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.
No comments:
Post a Comment