Twitter Inc (NYSE:TWTR) has been in a downward spiral for some time as investors express concern that user growth on the company’s platform is slowing. However, options plays may offer a chance for investors to get in on the stock without leaving themselves completely exposed. In a report dated May 1, BGC analyst Richard Anthony suggests that investors might want to consider his Twin Peaks approach.
Options for Twitter
The analyst said his options approach for Twitter Inc (NYSE:TWTR) combines a call spread with a put spread at a certain ratio. He says there’s the potential for profit at a number of prices spanning from $26.50 up to $35 a share and between $40.50 and $49 at expiration on July 18. He said profits from this approach maximize if the stock is either at $45 or $31 when the options contract expires.
Since its inception in January 2012, the long book of the Voss Value Fund, Voss Capital's flagship offering, has substantially outperformed the market. The long/short equity fund has turned every $1 invested into an estimated $13.37. Over the same time frame, every $1 invested in the S&P 500 has become $3.66. Q1 2021 hedge fund Read More
He notes that there is a “stand still return” that could be available before the contract expires.
Twitter lockup expires
Starting tomorrow, approximately 480 million more shares of Twitter Inc (NYSE:TWTR) stock will become eligible to be sold. That’s because the lockup on those insider-owned shares expires today. It’s been in place since the micro-blogging company’s initial public offering back in November. This is the second lockup expiration since the IPO, although this one is significantly much larger than the previous one. In fact, the number of shares which become eligible for trade tomorrow is more than four times how many is available for trading as of right now, according to Bloomberg Businessweek. Needless to say, if insiders sell all of those shares, the company’s stock price will likely plunge.
Many major shareholders of Twitter Inc (NYSE:TWTR), however, have indicated that they won’t sell. Venture capital firm Benchmark and Evan Williams, one of the cofounders, have said they won’t be selling tomorrow. Last month, CEO Dick Costolo and cofounder Jack Dorsey also said they would be hanging onto their shares. Bloomberg Businessweek cites sources who also say that Rizvi Traverse Management, Twitter’s single biggest shareholder, will keep its shares as well.
That’s a good thing for the company, as its stock price has fallen by nearly 40% so far this year.