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Mike Khouw's Twitter Trade

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On CNBC's Options Action, Mike Khouw suggested that investors should consider an options strategy in Twitter Inc (NYSE: TWTR).

Khouw thinks that it would be a good idea to buy the March 22 put for $2.25, sell the March 20 put for $1.40 and the March 18 put for $0.85. The net premium paid would be zero and if the stock drops to $20, he would make $2. If Twitter, drops below $18, he would have to buy the stock, but his entry point would be $16, because he would make 2$ on the March 22/20 put spread. Below $16 the trade would start to lose money.

The entry point of $16 is equal to $9 billion in market capitalization, excluding the cash Twitter has, explained Khouw.

 

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Posted-In: CNBC Mike Khouw Options ActionOptions Markets Media

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