Last week, I received a Tweet that blew my mind—here’s what it said:
@Jacob_Mintz still have a screen shot I made 300k profit on this calls thx.
Here is the Tweet I sent on February 11.
Buying BAC calls exp. in 2017/2018 becoming a great risk reward opportunity. January 13 calls exp. 2017 for $1.16 seems like a great “shot.”
My Tweet was an idea to take advantage of bank stocks that had fallen earlier in the year. I felt that buying call options in Bank of America (BAC), and paying $116 per call (which was the total exposure for the position) with unlimited upside potential, offered a great risk/reward opportunity. So I Tweeted out the idea and forgot about it. Clearly my Tweet made a big impact on one trader—and it shows the awesome power of Twitter.
I no longer subscribe to newspapers and don’t watch the nightly news. Instead, during the trading day, I scan my Twitter feed for the latest breaking news. Links are constantly coming at me from The Wall Street Journal, New York Times, Fox News and The Washington Post. Twitter is the way I get my news.
And while I love the Twitter (TWTR) technology and platform, the company’s stock is a mess. The company seems to disappoint investors with earnings misses every quarter. The stock plummets on the bad earnings and then begins to rally as rumors circulate that Facebook (FB), Google (GOOG) or Microsoft (MSFT) is preparing a bid for the company. The bid never comes, and the stock continues to chop around, driving shareholders crazy.
Cabot Top Ten Trader Chief Analyst Mike Cintolo and I chat every day, trading our thoughts on what we’re seeing in the market. Mike gives me his thoughts on the charts, and I give him my thoughts on the options market and risk. Here’s the chart of TWTR and Mike’s thoughts:
“TWTR looks like a lot of beaten-down stocks—it’s trying to bottom out, but not showing enough strength to conclude big investors are picking up shares. TWTR’s major low was in February just south of 14, and during the next five months, it repeatedly tested (and held) the 14 to 16 area, which is a plus. There’s even been a little rally in recent weeks, with the 50-day line offering some support, another plus.
“But overall, it’s hard to say TWTR is actually in an uptrend, which is required for me to get excited. In fact, during the past two weeks, sellers have become more active, and last week’s pressure isn’t a good sign. Overall, I’m more neutral on TWTR than anything, though a big trading volume surge above 22 or so might catch my attention.”
A Bullish Option Call on TWTR
At this year’s Cabot Investor Conference in mid-August, one of the most popular sessions was “Stock Roundtable Clinics.” Mike Cintolo and I combined to talk about how to use Mike’s chart reading and recommendations with my options trading techniques to produce big profits. Originally we had planned to talk to approximately 10 Cabot subscribers. However, the demand was so strong, that we pulled together two tables and there still was standing room only!
This overwhelming interest was not surprising to me. I get emails all the time from readers asking how buying call options on Mike’s Cabot Top Ten Trader recommendations might increase their profit. For example, if Mike recommended TWTR and a reader asked me how to put on an options trade, I might focus on buying call options with upside (like the successful BAC position above).
With TWTR trading at 18, if I were looking to execute a bullish option trade, I would buy the TWTR January 20 Calls that expire in January of 2018. To buy these calls, I would need to pay a premium of $3.50, which translates to $350 per call. That $350 would be my total exposure if TWTR were to fall to new lows.
However, if TWTR was able to turn itself around and run to the upside or even get taken over, my call purchased would give me the right to buy 100 shares of TWTR at 20 at any point before January 2018. And my upside profit potential for these calls is unlimited.
To receive more guidance on how to execute option trades, consider taking a trial subscription to Cabot Options Trader. I will walk you step by step on how to make the trades which have the possibility to bring you double or even triple-digit returns, like the ones our current subscribers are on track to receive in WWAV October Call (profit of 312%), VEEV September Call (profit of 168%), SYMC April Call (profit of 30%) and many others.
