Momentum Options Trading Blog
Daily market updates at 9am & 1pm EST
Categories
Archives
Blog Roll

Twitter (TWTR) Pushing $75/ December Strangle Option Trade Zoomed 329%, Profit Alert!

11:40am (EST)

As we wind down 2013, we thought we would take a quick look at the amazing run Twitter (TWTR, $74.09, up $4.13) has been on and why trading options on momentum stocks can be the most lucrative investments you will ever make.

We have been covering Twitter daily since its IPO back in mid-November with possible option trades but we have been a deer in headlights as we have been frozen by its amazing momentum.

Strangle option trades are also called chicken trades because a trader is unsure of the direction a stock will move.  However, a trader may feel as though a huge move will be made so while they are sometimes called chicken trades, these trades are for the savvy investors and most Wall Street pros tell rookies to stay away from them believe it or not even though these knuckleheads have no clue how they work.

Well, we will dummy things down to show you how easy strangle option trades are to do and to not be afraid of them.

Twitter shares zoomed past $70 during Tuesday’s shortened session and have reached a peak of $73.60 today.  Here was our original writeup and thoughts from the November 15th Midday Update along with an incredible strangle option trade that has played out like a fiddle (quotes are from that day).

Twitter (TWTR) Options Now Trading

12:00pm (EST)

We were looking forward to Twitter’s (TWTR, $44.20, down $0.49) recent Initial Public Offering (IPO) as a possible trade for our Weekly Wrap portfolio but we knew when the offering price kept bumping up our subscribers would get priced out.  We were looking to get in for under $30.

The range moved from the mid-teens a week ahead of the offering to the mid-$20′s that week of the debut to the low $40′s ahead of the open on the first day of trading.

We aren’t sure if the volatility has created a shorting opportunity or the chance to go long because the chart is too fresh to get a good read.  However, we do believe shares will be 10% higher of lower by mid-December and with Twitter options now trading let’s take a look to see if there is an opportunity to take advantage of this possible move.

A 10% move from current levels would push Twitter’s stock towards $50 or below $40.  Since we are unsure on direction, we can use options to calculate if there will be a profit if one (or both) of these price targets are achieved.

There are Weekly options available on Twitter so we could use the November chains for a possible play but we want to give the trade time for the stock to make the 10% move.

The December regular options have 35 days before they expire so they would be our first choice for a possible trade.

The December 48 calls (TWTR131221C00048000, $1.40, flat) could be used as a way to play a run to $50.  If the stock is at $51 by December 21 these options would be worth at least $3, or a double from current levels.  If the stock is below $48 these options will expire worthless.

The December 41 puts (TWTR131221P00041000, $1.40, flat) could be used as a way to play a drop to under $40.  If the stock is at $38 by December 21 these options would be worth at least $3 for a return of more than 100% from current levels.  If shares are above $41 by expiration then these options would expire worthless.

If we priced both options together, the total cost would be $2.80 and if shares are above $51 or below $38 a strangle option trade would make a small profit but if shares make a stronger move to $53-$54 or $36-$35 by December 21, these options as a strangle option trade would make you 100% or more.

We won’t be taking any of these trades today but we could over the next week or two as we will add these options to our Watch list.  We could take a swing at a Twitter trade using these options or another combination and if and when we do, you will be the first to know. (END)

The December options expired last Friday and Twitter shares closed at $60.01.  Notice how they closed a penny above the 60 option strike price as this was the battleground going into December expiration.

The December 48 calls were worth $12 when they expired and they were profiled in real-time at $1.40.  The profit on this side of the trade would have been 757%.

The December 41 puts were also at $1.40 and they obviously expired worthless.  Nobody was going to “put” Twitter on you at $41 when shares closed at $60.  The return on this side of the trade was (-100%).

We mentioned the total cost of the trade would have been $2.80 so let’s do some math.

If you had purchased just one option contract of each call and put, the cost would have been $280 ($140+$140).  A 10 contract trade would have cost $2,800.  A 5 contract trade on the calls and puts would have cost $1,400.

Option trading is about what you can afford to play with so we will cover all of them quickly.

The December 48 calls would have been worth $1,200 on 1 contract so the return on $280 would be 329%.

A 10 contract trade would have been worth $12,000 on a $2,800 investment for the same 329% return.

The $1,400 to buy 5 contracts of the aforementioned call and put options would be worth $6,000.

We cover a lot of ways to use options in our soon to be released option trading manual, How to Trade Options on Momentum Stocks.  The 2014 editions are shipping mid-January as we have to wait until the final charts for 2013 are ready to add for all of the major indexes.

This part of the trading manual is crucial as we show you how we predicted Dow 16,000 back at the beginning of February and when we make our annual forecasts for the market.  Nobody, and we mean nobody on the Street predicted the Dow would surge 3,000 points this year.  Well, we did and we don’t work on Wall Street.

We have a ton of more secrets that will be showcased in our trading course and new videos will be coming as we prepare for the Super Bowl for earnings.  4Q results will start to pour in the second week of January and will play a major role in the market’s direction.

The bulls are keeping the train on the tracks as they rapidly approach our yearend fluff targets we have been talking about.

The Dow is up 74 points to 16,431 while the S&P 500 is higher by a 6-pack to 1,839.  The Nasdaq is advancing 11 points to 4,166 and the Russell 2000 is at 1,164 – up 2 points.  The S&P 500 Volatility Index ($VIX, 12.21, down 0.27).

We have updated our current trades and we have a Profit Alert for one othat is up 50%.  We could have additional Profit Alerts today and/ or New Trades so stay locked-and-loaded into the close.

Tags: , , , ,

Comments are closed.

Weekly Wrap Subscription

    Stop Missing Out!
    Real-time trades and detailed stock market analysis for the past week and week ahead.


Free Download

    Download a FREE copy of our detailed Track Records. Register today for access to all closed trades for 2014 and past years.

    Enter Your Email Address:


Follow us on Facebook
Follow us on Twitter



Biggest Winners












    The portfolios can be found in the Members Area as well as past portfolios from 2008-2011. Overall, we are 621-273 on nearly 900 real-time recommendations that equals a success rate of 70%. This means, on average, 7-out-of-10 of our option trade recommendations make you money and we hope to have an even better success rate for 2013.

    If you are missing these juicy profits, come give us a try. Get your password to our Members Area instantly when you sign up TODAY! One profitable trade will easily pay for your membership. You can request our 2008-2012 Track Records by sending us an email or filling out the box below.

Trader Comments:
    I just want you to know that I love the way you write and explain everything. I am new to this, and have lost 50% of my account until I met you guys. Iit is slowly coming back. I will be calling to set up a year of membership rather than the one quarter. Thanks again, and LOVE YOU ALL. REGINA L.

    Rick, I appreciate the advice. I think I will just sit back and utilize your selections only for awhile. This will obviously save me a great deal of money in commissions. I have gone thru your entire site including the video on money management. This has brought me to the stark realization that I have been trading too much for too little. I definitely have not been "swinging for the fences", but I also think I have been getting impatient with trades and getting out too fast. This has no doubt caused me too trade too much. I like, and definitely agree on, the advice on money management. Thanks for the help. STEVE T.

    Thank you!!! I held on to the NFLX position since Nov. 13 at a cost of $1.89. Sold ½ on April 14th for a 540% return and the other ½ upon earnings for 702% return. Total profit of $11,615 a 621% return. Keep the recommendations coming and thanks to you and your team for the service you provide. SCOTT H.

    Rick & Team, GREAT Call on NKE for my two trading accounts:
    1) Entry at .65, out at 1.45, 1.55 Profit = $415
    2) Entry at .60, out at 1.75, 1.50 Profit = $485 PETER G.

    Hey Rick! Here is an update on what your picks have done in my accounts.

    1) Great call on the JoyG March 55. I bought when you said, then bought again on one of the dips. Booked 80+% profit. Made enough to pay for your service for years to come.

    2) Also booked profits on your Berk Feb 74 (80%) and threw a major chunk of change at the March 75’s (190+%). I would have never known that Buffet's stock had split if it weren’t for your service. Bought the shares also for the long haul. Won’t look at them for another 20 years. Great job on getting us in before the indexes did.

    3) Took profit on your Imax March 12.5. 20 cent trailing stop at 1.90 yesterday. Not sure what the profit on that was, but profit is profit.

    I see that you took a loss on some of these. It’s all good. I look to trade your “ideas” not your exact calls. I THANK YOU! For your ideas and commentary. Keep up the good work. And keep those ideas coming. LAWRENCE O.

    Loving this subscription so far! I got into the BRK feb 76 calls the day you talked about right before the split...now up over 300% (0.70 to 2.475)! Keep the good picks coming and let's see some OSIS and EMC upside soon! Just wanted to share my positive enthusiasm on your newsletter...it gives us individual investors great ideas on not only the options market, but also the broader equity market! Case in point is BRK...I can't always read the breaking business news but its easy to read your twice daily updates on my smartphone...helped me get some BRK shares immediately after the split which I will hold for the long haul! Thanks again! C.J.

    Aloha Rick - Thank you so much for the great CL pick. I am not sure if there was buy-out/merger news or what but at 3PM today Colgate-Palmolive absolutely EXPLODED to the upside, and my calls turned into green candy when they went from 1.40 to 3.8 in a matter of seconds! I even sold a few for over 4.0! Much thanks and keep the solid picks up my friend, honestly. Only a fool would scoff at 267% gains... Peace! SHAUN

    I like the fact that you ask for comments from subscribers. Good customer service. By the way, am enjoying the service so far. Some good profitable calls. Keep up the good work. MICHAEL K.

    Woo hoo! Out for 50% on WMT this am. Making up for my depression for getting out of pcln for a 30% gain monday :( you the man! any word on the manual? My friend Mike ( who I sent to your service) told me he emailed you about your integrity in reporting fills. I echo that sentiment big time.. keep it up! Cheers!
    PARAG P.

    Hi Rick, as a new member all I can say is, 'show off' LOL, with PCLN. JAY P.

    Rick, I am a new subscriber to your service, and I want to say I am impressed. I am impressed by your results, but more than that I am impressed by your reporting of your fills. You could have easily said you got that Wal-Mart call today for 80 cents, instead you reported 98 cents! Good job and keep it up, I watched the reporting of the fills first, and then I subscribed. Thank You. MIKE

    Hi, good morning. I jumped the gun a little on this one (PCLN). But still made $1,675.00 profit!! Very happy!! Keep up the good work!! Thanks. TRISH D.

    Hi there, I have joined recently, and I am very happy to tell you that I am up over $10,000 on your picks in a month. I started on 10/7 with the Intel pick. I'll be your member for life. Please don't quit on us. Also, I am learning a lot about options. I didn’t get in your recent APOL and that gold trade and only had one loss on CHK. I appreciate all the DD you do. I enjoy your market commentaries. Best advice site period, and I have tried a few here and there. Again, you guys rock! MIN L.

    Thanks be to Momentum Options Trading for providing me with some fantastic wins. I just started with this service and am up nearly 50% in less than a month. There have been losses, but if I manage them properly, I will continue the best efforts given on the blog (in which there are no complaints). What a great cause for humanity. I feel more confident about my trades and continue to play the wins. Best of all, I am now keeping my regular paychecks in the bank! Thank you! JOE G.

    Rick - I wanted to say thanks for getting me started on the right foot with your service. I have made six trades since starting on October 22, 2009. Five are winners and One loser netting me $6,245. Thanks again and keep the trade recommendations coming. GREG F.

    I got into the Nike 60 Call at 1.85, sold at 5.00, also bought a 55 put at 1.05, but got stopped out at .35. What a ride! $2830.00 in the black even with the put. It's right at 100% return. I hope earnings season coming up is going to look like this trade. NOEL

    Nice call on Nike. I think I'll go buy a pair with my profits! : ) I did the straddle for safety but still made 62% on the trade. Not bad for less than 24 hours. If Goldman is right, then the Nov 70s or 75's could be a steal today. TODD F.

    What a sweet way to get introduced to Momentum. My first trade based on your picks and it a 2X. Thank you! PAUL H.

    “Limit order was set at 1.60 on RIMM so it sold. I may have left some money on the table but you can't go broke making a profit. That was a fun trade. Thank you. Good call. I’ve been watching and trading Rick's advice since March. It’s usually a fun ride, but I give him heck when it's wrong to. :) ” NOEL

    “Your service rocks! I made bank on Dendreon last week! The other thing I have to say is that it took me quite a while to find a REAL options trading service like yours. Most of what’s out there is 99% scam and very sketchy. Momentum Options Trading is the first service I found that I can trust and seriously make money with.” CHRISTIAN

    “I made $420.00 on ANF in 2 days. Thanks for the trade and updates on getting out of the trade.” JOHN

    “I did follow a lot of your trades with 1-2 contracts per trade and YTD I’m up 108%. I try not to follow blindly by not entering all of your trades and sometimes entering the ones you don’t. I entered AIG a few weeks ago against recommendation – that one hurt.” CHARLES M.

    “I have been following you for several months and am interested in the new service. I hate to see the free service go away but as they say, “all good things must come to an end”. My ability to join will be greatly influenced by the monthly fee so I’m very curious to see the new prices. Thanks for making April a great month for me and my family.” BRYAN C.

    “I have really enjoyed the past month since finding your blog. You have made some great calls. I would appreciate info. on the new options mentoring program. Thanks.” JOHN H.

    “Hi Rick, I have been following your blog for several months now and I would like to be including on the list for your new service and to receive more information about it. And yes I was a Dendreon winner with your tips. Turned $280 into $7700, and literally saved my butt.” JEFFREY

    “I made over 6k on your Dendreon trade, and I’m very interested in learning how you pick and trade options. Sign me up.” ED

    “Rick – Wow what a day! I got in at the Dendreon calls at $2.25. Thanks to for your advice. I appreciate that. This company has a lock on this type of therapy and no one else in the world is close. Kind of reminds me of the type of companies that Peter Lynch and Warren Buffet suggest that investments be made in. Companies that can build a moat around their business model, that allows them to charge a premium for their product or service. In other words - a monopoly.” GREG

    “Hi Rick, Thank you so much for the Dendreon trade, I made almost $10,000 with that trade with a little over $2,000 investment. You have shown me the power of options trading. Again, thank you so much for all your inputs.” KEN

    “Hi Rick, thanks for the encouragement to play the dendreon calls! did freaking great! Got in the first lot at $1.44 on 3-24-09, sold at $2.45, 70% not bad. Bought it back at $2.30 on 4-7-09 closed out on 4-14-09 for 454% gain! Wow! I love it when that happens. So, thanks the encouragement to get back in when others were saying sell, sell, sell. Keep up the good work.” GARETT

    “Rick – Thanks for Dendreon – it has made all the headlines today! I missed on RIMM earlier, but I’ve been holding onto DNDN calls since 3rd week March. Of course today it all paid off today, as DNDN rocketed up.” TERENCE

    Jan. 31 2012
    Rick, new member...Studied all current trades, did some chart work,picked ZNGA, PEP, MGM...Sold on Feb. 2 for $3600.00 profit...Cost for 1-year membership to your newsletter was less than $1000.00..All I have to say..Thank you. John H –

    3/18/11
    Rick, I purchased 10 contracts of the Nike March 85 puts Thursday afternoon for $2.00. Thing is, I was upset because the puts went down to $1.60 or so before the market closed. Well, needless to say Nike didn’t impress Wall Street and when I turned on the computer this morning the puts were worth $7.10! Sold them for a $5,100 profit!. Thanks again, you are the MAN. Chuck J-

    2/3/12
    Hi Rick,

    I will start off with a thank you for your time and dedication to all
    the research you and your team commit yourself to. This is not me just being excited about the profits I have accumulated aka (bank) ! You have helped me get back to the passion I had of researching stocks/options. Keith N-

    Hi Rick,

    I want to share my great results on GMCR. Based on your comments on February 15th, I bought 20 options at $0.28. They closed today at $7.00, which is a 2,300% gain. My $560 dollars turned into $14,000 in less than a month. In decades of trading, this is my single best trade ever. Thank you! By the way, the Dow was down 228 points today and I could care less. What a great trade. It proves the amazing power of options. I am so grateful for your service, which calls it straight all the time, your options trading manual, and most of all, your amazing skill
    at finding winning trades. I have attached a copy of the trade from
    my brokerage screen.

    Hi Rick,

    Wow!! my account it up 70% since i joined last month and market is going the opposite direction. Really appreciate your service. I just wanted to drop a note to say THANK YOU. Hope to be with you guys for a very long time. Mel

    Rick,

    Great call on Fosl I bought the may 120 puts for 3.70 yesterday morning just sold for $32.00 today
    Keep up the great work
    Thank you, Henri

    Rick –

    I bought 10 Deckers Outdoor (DECK) May 55 puts at $0.50 on 4/26/12 and sold them on 4/27/12 for $1.65. I made $1150 in one day. Thanks. I knew something good would happen sooner or later.
    HOW THE HECK did you know Green Mountain Coffee (GMCR) was going to go down 20 points???!!!! I bought 10 of the May 35 puts at $0.49 and then 5 more at .30. I sold them at 5.80. Thank you again.
    You have made a believer out of me. Alan

    Rick –
    I have only been a member for about 6 weeks but I have done well on most of the trades. My first two were QQQ and SPY a month ago and since then I've gotten into the groove and been doing well.
    I try to execute the trades that you recommend as soon as you send them out, sometimes I can't and I miss the Entry price. However, sometimes when I miss the Entry, the price goes down and I get a better price.
    That's exactly what happened with GMCR.
    You recommended it at around $.81 I think, but by the time I got to it, the price was $.27. I bought 100 Puts on Wednesday May 2, 2012 and sold half of them 24 hours later at $5.95 for a nice 2,203% gain. As per your recommendation, as GMCR went above $30 I sold the remaining 50 Puts at $5.50 for a slightly less 2,037% gain.
    On average that one trade netted me a 2,120% gain, entirely based on YOUR recommendation (and a little bit of luck). To put this in real terms, I risked $2,700 on Wednesday and pocketed $54,550 just 24 hours later.
    So uhh, let's do that again real soon!!
    Feel free to use my name. The tax guys have me on speed-dial already anyway. Dennis

    Rick:
    That was awesome on your GMCR pick, I know how risky it can been holding into earnings but you pulled it off. 
    I just started my autotrading with you today and am in on your QQQ play. I look forward this service. 
    I have a busy career and I have tried to follow and trade throughout the day and found it too hard. I hope you continue to have a great year, I plan to go along for the ride. I am starting slow but will pile more in once I have secured some profits. 
    Keep up the good work your trading has been spot on. I am sure you paid your dues to get this point in your career. Anthony

    Rick:

    Great call on GMCR!  I have been trading for about 15 years actively.  This may be the best trade I ever made.  Got in on Monday, April 30 and the stock was up from when you recommended it.  It went up further after I got in.  Here are the facts:
    Monday, April 30th: Bought 15 June 37's at $1.25= $1900 approx
    Thursday, May 3rd: Sold 15 June 37's at $9.30=$13,950
    Gain for the week: $12,050.
    I understand you will not get them all right.  It’s important to ride those winners and as you could tell from my selling price, I sold when the stock went to $28.10, so left a little on the table.  Who can complain.
    Keep the suggestions coming, looking for another jump on your FSLR, one that I have been riding very hard.
    Best regards, Bob
      

Follow us on Twitter