Dan Nathan's Risk Reversal Trade In Twitter

On CNBC's Options Action, Dan Nathan spoke about

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Twitter Inc

(NYSE: TWTR) and he suggested a way to trade the takeover rumors in the name. Nathan doesn't want to rush in and buy the stock on a possibility of a deal by the year end, but he wants to consider a strategy called a risk reversal. He wants to sell the December 16 put for $0.65 and buy the December 24 call for $0.65. The net premium is zero and the trade is going to make money if Twitter closes above $24 at the December expiration. If the stock trades below $16 at the December expiration, Nathan is going to have to buy the stock at $16.