Investing With Options header image ≡ Menu

Just Released: Get Your FREE Iron Condor Trading Toolkit

Click Here to Download

How to Trade the Twitter Takeover Talks With Options

After 9 months of chatter, new finally came out that TWTR is in talks to be acquired.

The stock jumped from 18.50 to the low 20's overnight.


This is after peaking out in the 70's a few years back:


We aren't sure who will take them out, but here's the current list:

  • Microsoft
  • Google
  • Blockbuster
  • Salesforce
  • Bill Gross
  • Verizon
  • Disney
  • Comcast

And probably about a dozen others.

Personally, I think there's a ton of value in the company that has been poorly executed upon.

And even if they are bought, company cultures will clash and it will not act as a "magic bullet" for the acquirer.

But that's just me as an armchair quarterback. Let's see how you can potentially profit from it.

Potential takeout prices have ranged from 24-30, and the implied volatility has jumped pretty significantly:


The IV is high but is on par with what we see headed into an earnings event.

There's 3 setups to consider here:

If You Are Pretty Sure The Stock Will Be Bought At A Premium

Consider this trade:

TWTR Call 1x2 Trade Setup
BTO1xTWTR21 Oct 1626Call
STCAMZN16 Sep 16720Call
STO2xTWTR21 Oct 1628Call
Total Debit:0.03


Now this is a call 1x2 sale that has theoretically unlimited risk. So if TWTR is bought out at $40 then you're basically hosed.

Yet if you are pretty certain that the takout price will be in the high 20's, this is a way to capture a significant amount of premium without needing to worry about if the takeover talks get pulled.

If You're Not Sure The Stock Will Be Bought But Still Want To Play Upside

IWO Premium Order Ticket
BTOTWTR21 Oct 1622Call
STOTWTR21 Oct 1626Call
Total Credit:1.77


So this is a decent bet that allows you to get some decent gains on upside movement and still have wiggle room if any bids are pulled.

If TWTR is taken out, great you've got about an 80% return.

If it isn't and the stock drops, you can buy to close the 26 call and just have the 22 call on straight up. Odds are any gap-down-on-bad-news will fade a little bit so you can still earn some decent money anticipating that bounce.

If You Think TWTR Won't Be Taken Out

Proactive Spreads Order Ticket
STOTWTR21 Oct 1618Put
BTOTWTR18 Nov 1618Put
Total Credit:0.28


This trade makes the bet that if the offer is pulled, TWTR will gap down hard back under 20.

Also, the October options will lose their premium and the November will stay elevated into earnings. So you get an extra "kick" with your trade.

Get An Edge In Your Trading

This is a "special case" kind of trade setup that doesn't come along very often. Yet the idea flow at IWO Premium will give you plenty of setups to trade over the next few weeks.

At IWO Premium you'll get live trade alerts, market wrap videos, and a trading chat room.

14 Days For $14-- Click Here To Signup

Why GOOG Options Are A Buy Right Now

I've been talking a lot about how options are really, really cheap right now.

And to be fair, it makes sense. The S&P is in the tightest range we've seen in something like 20 years, so the options market is responding in kind.

But we're starting to see an overshoot.

Take Google Alphabet (GOOG) for example.


The stock had a nice pop on earnings, and really hasn't gone anywhere over the course of a month.

What's the options market telling us?

One quick way to measure the volatility in the market is something called "price over strike."

We take the price of the straddle and divide it by the strike price of the straddle.

The Sep 770 straddle is going for $19.

That gives us a price over strike of 2.4%.

What does that mean?

If you buy this straddle and GOOG moves at least 2.4% by Sep opex, you're going to make money.

Show Me The Odds

You may ask yourself...

Well, how often does GOOG move 2.4%?

I've ran the numbers.

Looking at a 10 day trading window... so not even 20 calendar days but 14 calendar days, this is what I see:


Here's how I got this graph...

I looked at the maximum gain and maximum loss of any time during that 10 day window... and took the largest of those values.

Clearly, GOOG moves a lot more than 2.4%.

How much?

This sample is over a 5 year window... I've got 1,248 samples.

The number of times over 2.5%?


That means you've got a 75% chance that GOOG moves more than 2.5% in a 10 day window.

It's not just slightly better than a coin flip... it's a flip and a half.

I don't recall many times when the options market skews the odds this far into the option buyer's favor.

Pretty good odds, don't you think?

If you want to see how I'm trading this, come join us at IWO Premium. 14 Day Trial for only $14.


The One Simple Trick It Takes To Get An Edge in the Market

Yet there's one question so many have trouble answering...

If everyone has access to the same information, how is it possible to get any kind of edge in the markets?

This especially holds true with technical analysis. After all, everyone is looking at the same moving averages, trendlines, and price patterns.

How can the difference between winners and losers be so big when everyone is looking at the same charts?

There is something to be said about your own psychology around risk and how you execute on your trades...

But I'm going to show you how a simple shift in your mindset can completely change how you approach the market and drastically increase your performance.

First, let's stop by the poker table.


The Cards On The Table

Say you are playing a game of poker against 7 other people.

Specifically, Texas Hold'em

What information helps you make a decision?

Well, you've got the cards in your hand.

And you've got the cards on the table.

Everything else is hidden from you until all the bets are done.

And you know what? You could calculate your odds of success based on the cards on the table and the cards in your hand.

But that wouldn't make you successful.

The Mindset Shift

There's so much more going on at this poker table that can give you an edge.

What's the chip count of each of the players?

Who has a small stack and about to go on tilt, and who has a big stack that has all the time in the world?

How much has each player had to drink? Is anyone drunk enough to make stupid bets?

How long has each player been at the table? Who is looking fatigued?

Does anyone have a tell? Are they bluffing on their bets? Are they trying to slow play you until the river card?

And then you can go into your own thoughts. Are you stressed about this hand? Do other people think you're stressed about this?

There's a lot more going on, isn't there?

If all you do is focus on the cards on the table and the cards in your hand, you're going to be at a significant disadvantage.

Being successful is not about playing the cards, it's about playing the players.

How To Change Your Mindset in the Markets

Just like Texas Hold'em, everyone sees the cards on the table.

But with investing and trading, some information goes out the window.

You don't know who you're trading against, you don't know their "chip count," you don't know what kind of positioning they are coming from.

Yet, you can feel it in the markets.

In many instances, you can quantify it through technical analysis.

80% of my technical analysis is not based on the charts I see, but on how I think other people are positioned into the trade.

Where are the pain points on the chart?

Who owns this stock?

At what price will most people get stopped out or forced into the trade?

What is the overall positioning of participants and at what prices?

What new information are they waiting for to make a decision?

Being a successful trader is not about looking at lines on a chart... it's about playing the other players.

That's why there is a huge gap between winners and losers.

Get Clarity in the Markets

If you change your mindset and how you approach the market, you'll start to see things differently.

You'll realize it's not about how this moving average will support price, it's how you know it's high odds institutional buyers will step up.

You'll realize it's not about shorting a breakdown, it's how you know that there's a bunch of investors that are about to see their position go from green to red.

You'll realize it's not about chasing an earnings gap, it's how large players are being forced to chase as well and you can get in and out faster than them.

Change your mindset, change your approach, and see your performance drastically improve.

The Cheapest Options You Will See This Year

When an earnings event comes out, the premium in the options market will go down.

By a lot.

That's because the market no longer has to price in the risk of an event.

Yet there are sometimes in which the option premium gets so low that it makes sense to be a net buyer of options.

Let's take a look at an example.


This is VXAPL, which is the VIX for AAPL options.

There really wasn't any kind of bid going into earnings, and after earnings we saw it drop below 20.

This is an incredibly rare occurrence, and it tends to revert back.

These are levels you won't see the rest of the year. And we're seeing the same kind of setup in other high beta tech stocks like AMZN, FB, and GOOG.

If you've ever wanted to buy volatility, this is the best risk/reward you're going to get.

Want to see how we're trading it? Join IWO Premium for video analysis, trade setups, and much more.

Get The Best Option Trading Fills

If you're looking for full time profits as a part time trader, you must adjust how you approach the market and how you execute on your trades.

I'm going to show you a simple way to get better entries and exits on your option trades so you can earn better profits even when you aren't in front of a screen.

Avoid This If You Want To Stop Losing Money In The Market

If you are a reactive trader, then you'll spend all day chasing hot stock tips and getting bad fills. You'll feel like you're doing something in the markets, but when you look at your results it's disappointing.

Your success as an options trader revolves around how you plan your trade executions before they happen.

Step 1: Pick Your Prices

This may seem obvious.

Yet it's a mistake that many new traders make.

What I've found with new stock and option traders is that they rarely get the best price on a trade.

By forcing yourself to pick the best price, it keeps you out of bad trades and allows you to tune out the noise.

Will you miss out on a few winning trades?

Sure it's possible. But you'll also be avoiding those costly reactive trades that deplete both your financial and psychological capital.

The other benefit of picking your price is that it allows you to take a step back and be a much better observer of the market.

Your opinions and biases are completely different when you're involved in a position compared to when you are "stalking" for the best price.

If you get good enough, you can develop a feel for a stock on where the pain points are and where the stop runs will be. Those are usually the best entry points for a stock.

Here's an example:


Chevron (CVX) just had a failed breakout. It cleared key resistance at 104 for a week or so, but the continued weakness in the oil space helped to bring the stock back into the range.

When we have a failed breakout, the stock tends to trade to the other side of the range, which is at 97.50. That's a price I'd be willing to get long.

Step 2: Pick Your Option Prices

This step works best when you are looking at reverting kinds of setups where you let the price come to you.

If you are trading breakouts or trend continuation plays then you'll need to be more active, setting alerts and being ready to enter on your breakout signals.

Yet if you're looking for a way to automate your options trading, this is as close as you can get.

Simply put, you need to pick your option strategy and then figure out what price that strategy will hit if the stock price comes into what you want.

Remember, options are derivatives. The pricing is derived from movement in the underlying and the implied volatility.

Let's head back to our example in CVX.

Say I wanted to use bull put spreads as a position. So I'd go out and look at the September 90/85 bull put spread.

Here's what it looks like right now:


So the current price is 0.33. That's not the kind of risk/reward I am looking for.

However, if CVX trades into my target price of 97.50, then the spread will be worth between 0.65 and 0.70. That's a better entry point.

Here's the cool thing... you can set GTC (Good till cancel) orders on this spread. That way you don't have to worry about being at your trading screen at the right time.

You've already planned your price, and planned your option strategy. What else can you do?

Step 3: Develop a Scaling Strategy

I'll be straight up with you, even if you have your perfect prices, the natural volatility of the market will try to shake you out of your position.

Why not use that in your favor?

When I work with newer traders, they view each trade as an "all or nothing" kind of strategy.

Get into the trade all at once, and if it doesn't work then you stop out.

Doing that leaves you with tighter stops on a trade, giving you higher odds you'll get shaken out of a trade.

If you can learn to use the natural volatility of the market, you can get better fills and more profits with the same amount of risk.

Let's go back to our example in CVX. My initial price would be 0.65, but I would start with smaller size and then add to the trade at 0.95 and then at 1.50.

That way if CVX really stretches to the downside I'll be prepared to take the heat and increase my odds in the trade.

Want To Get This Done For You?


We just launched a new service called Proactive Spreads.

With this service, you'll get the best stocks, at the best prices, with the best option spread to trade.

It only takes 15 minutes to setup the trades in your brokerage account.

Want to learn more?

See how you can become a more consistent trader with Proactive Spreads.